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RE: [LandCafe] Baby Steps - Was: No land price with full land tax - simply is not true

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  • Neil Gilchrist
    Sean, Reasonable comments. I am not sure they are correct though. I don’t have any actual data to hand though, so I can’t disprove them. I think your
    Message 1 of 26 , Nov 10, 2006
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      Sean,

       

      Reasonable comments.  I am not sure they are correct though.  I don’t have any actual data to hand though, so I can’t disprove them.  I think your estimate of the land portion at 30% may be off the mark.  In some areas the land value is closer to 100% of the property price.  In other words it is a knock down build again situation.  I expect there is a rule of thumb for new developments for capital to land value.  The ratio may change depending on the value.  In other words it may be desirable to put it a higher proportion of capital for a valuable site than a marginal site.  However, the moment the development is complete the improvements depreciate.

       

      An example:  I bought my home for $82,000.  After about 10 years I sold the house on the land for 80 cents.  It was taken away on a truck which was cheaper than demolishing it.  I built again on the same property.  It cost me about $200,000 to build the new house 12 years ago.  At the time I build I think the bank valued the land at about $300,000.  The property is probably worth about $850,000 now.  That suggest the land value is at least 70% of the property value.  In fact, it saddens me to think that developers might pay that amount and knock down my magnificent house that I designed, and built with my own hands.  A developer could profit by building townhouses or apartments on this land.

       

      I don’t see the point of annualising the value.  If you do it with land, you should do it with all assets.  Labour is not an asset so it is not relevant to my assertion.  While the improvements generally depreciate, the land appreciates so regardless of the contribution to current value I expect owners would see the land portion as the more significant investment.

       

      Finally, there is a matter of perception.  Opponents of LVT will apply any comments about zero value to the whole property and the scare campaign will have an effect.  The fact that is untrue will not matter.  Many homeowners will have difficulty separating the land and the improvements.

       

      I disagree with the statement that increasing LVT will benefit the vast majority.  I think it will ultimately benefit everyone, including landowners.  Getting people to believe this is another matter.

       

      Neil

       

      -----Original Message-----
      From:
      LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of Sean Brooks
      Sent: Friday, 10 November 2006
      8:33 AM
      To:
      LandCafe@yahoogroups.com
      Subject: [LandCafe] Baby Steps - Was: No land price with full land tax - simply is not true

       

      1) it's a mistake to say that land is the most valuable asset people have:
      (US figures)
      Median home price is ~$220,000.
      Land portion of this is probably 30% - $66,000 - or less.
      So already, their home, at $154,000 is worth more than their land.

      2) Their land, at $66,000, might have an annualized value of $6,600/y.
      The median 4 person household income in the U.S. $65,000/y, 10x the value
      of their land.

      So we have their labor, and their house, which are already worth more than
      their land.

      Furthermore, the initial steps towards LVT, a dual rate property tax,
      financially benefits more homeowners than it hurts.

      Likewise, an increase in LVT collected, concurrent with a reduction in wage
      taxes, should benefit the vast majority of the population, who pays far more
      than $6,600 in taxes on wages.

      Sean


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    • Fred Foldvary
      ... The ideal is to collect the full economic rent, which is that portion not needed to put land to its best use, implying leaving some rental untaxed if it
      Message 2 of 26 , Nov 12, 2006
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        --- Mark Monson <mmonson1@...> wrote:

        > Selling price of land is indeed an evil as it is
        > theft.

        The ideal is to collect the full economic rent, which
        is that portion not needed to put land to its best
        use, implying leaving some rental untaxed if it
        facilitates a real estate market, in which case it is
        not theft but really part of the wages for exchanging
        land.

        > we
        > need a law that voids all private land debts so
        > people won't be stuck
        > paying twice: once to the private land creditor and
        > once to the public
        > tax collector.

        Does that not steal from the lender?

        > It is a fact that LVT will destroy land investment.

        It can't be a fact, since there is no such thing as
        land investment.

        Fred Foldvary
      • Scott Bergeson
        Quoting Fred Foldvary on Sun, 12 Nov 2006 09:37:09 -0800 (PST): ___Mark Monson___ we need a law that voids all private land debts so people won t be stuck
        Message 3 of 26 , Nov 12, 2006
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          Quoting Fred Foldvary on Sun, 12 Nov 2006 09:37:09 -0800 (PST):

          ___Mark Monson___
          we need a law that voids all private land debts so
          people won't be stuck paying twice: once to the
          private land creditor and once to the public tax collector.

          ___Fred___
          Does that not steal from the lender? ...

          there is no such thing as land investment.
          -----

          You said it. It can't be theft from the lender,
          because that concept can't exist for something not
          rightfully owned. ("Seizure" may be an accurate
          term.) More to the point, the Anglo-Saxon (U.S.
          included) financial systems seem to be predicated
          on land-backing of money and credit.

          Scott
        • Wyn Achenbaum
          Sean, There was a Federal Reserve Board study published in May, 2006 which said that in the top 46 metro markets, land as a percent of the total value of
          Message 4 of 26 , Nov 12, 2006
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            Sean,

            There was a Federal Reserve Board study published in May, 2006 which said that in the top 46 metro markets, land as a percent of the total value of single family residential property was 50.9% in 2004, up from 32.0% in 1984 and 39.7% in 1998.  Oklahoma City's figure was 23.3%, down from 27.9% in 1984.  San Francisco's was 88.5%, up from 74.9% in 1984 (not long after Prop 13, BTW); LA's was 78.7%, up from 60.8%; Boston 75.7%, up from 50.1%; NYC, 67.4%, up from 32.2%; Washington, DC, 67.4%, up from 46.7%; New Orleans 46.6%, up from 28.6%, Salt Lake City, 35.3%, up from 8.0%. (Tables 6a-6f)

            Those 46 major metro markets represent 56% of the US.  For the other 44%, they estimate the LSREV for single family housing at 27%.  So 50.9% on average for 56% of the US, and 27% for the other 44%, in 2004.

            The study is at The Price of Residential Land in Large U.S. Cities, by Morris A. Davis (University of Wisconsin) and Michael G. Palumbo (Federal Reserve Board), at  http://www.federalreserve.gov/pubs/feds/2006/200625/200625pap.pdf and http://www.federalreserve.gov/pubs/feds/2006/200625/index.html

            See Footnote 13, which says that a previous paper assumes that the nominal value of structures accounts for 87.5% of the nominal value of new housing.  This comes from an unpublished Census Bureau memo, and I can't find justification for a figure as high as that.  (Best I can figure, the figure should be 75% to 85% for spec houses.  If you have data points or theory on this, I'd like to know about them.)

            This article also provides a highly footnotable assertion that houses depreciate at 1.5% per year.  I wonder whether commercial property is any different.

            I've done a lot of calculations off the data provided, and what is most remarkable is how narrow the range of housing values is across the 46 markets, and how much the land value varies.  (I'll share them offlist with anyone who is curious.)   Of course these are aggregate figures for each metro area.) Consistent with Mase Gaffney's poetic observations within an urban area, in The Taxable Capacity of Land, at http://www.wealthandwant.com/docs/Gaffney_TCoL.html.
            Now do us both a favor, please. Pause and savor that comparison. Let it linger, as though you were testing a slow sip of wine from Fredonia's famous grapes. Roll it on your tongue, mull sensually over its aroma and bouquet, and, getting back to business, mull cerebrally over its full import. The house that shelters the very rich family is worth 2.8 times the house of the modest family; but the land under the house of the very rich is worth 17.5 times the land of the modest. Seventeen and one half times as much! Again, it is lot value, more than building value, that divides the rich from the poor. Seldom will you find an economic rule more strongly supported by data. It's just a matter of presenting the data so as to test and bring out the rule.


            Wyn



            Sean Brooks wrote:

            1) it's a mistake to say that land is the most valuable asset people have:
            (US figures)
            Median home price is ~$220,000.
            Land portion of this is probably 30% - $66,000 - or less.
            So already, their home, at $154,000 is worth more than their land.

            2) Their land, at $66,000, might have an annualized value of $6,600/y.
            The median 4 person household income in the U.S. $65,000/y, 10x the value
            of their land.

            So we have their labor, and their house, which are already worth more than
            their land.

            Furthermore, the initial steps towards LVT, a dual rate property tax,
            financially benefits more homeowners than it hurts.

            Likewise, an increase in LVT collected, concurrent with a reduction in wage
            taxes, should benefit the vast majority of the population, who pays far more
            than $6,600 in taxes on wages.

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            -- 
            Wyn Achenbaum
            webster, http://www.wealthandwant.com ... toward abolishing poverty
          • Mark Monson
            ... No. Bankers are not the producers of wealth that is lent. Nearly all of these funds are concocted through fractional reserve banking. Destroying land s
            Message 5 of 26 , Nov 13, 2006
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              Fred Foldvary wrote:

              > --- Mark Monson <mmonson1@wi. rr.com <mailto:mmonson1%40wi.rr.com>> wrote:
              > > we
              > > need a law that voids all private land debts so
              > > people won't be stuck
              > > paying twice: once to the private land creditor and
              > > once to the public
              > > tax collector.
              >
              > Does that not steal from the lender?
              >
              No. Bankers are not the producers of wealth that is lent. Nearly all
              of these funds are concocted through fractional reserve banking.
              Destroying land's value and land's debt will destroy bubble money and
              very little earned savings. The greater crime is to allow creditors to
              receive this unearned flow of labor that rightfully belongs to producers.

              Mark Monson
            • Wyn Achenbaum
              And another thought ... The median home price may well be $220,000, and let s say that land is 40% of that. But a large share of homeowners do not own their
              Message 6 of 26 , Nov 13, 2006
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                And another thought ...

                The median home price may well be $220,000, and let's say that land is 40% of that.  But a large share of "homeowners" do not own their properties free and clear.  For the bottom 50% of us (net worth distribution), "houses" are valued at $2.241 trillion and mortgage and home equity lines are $1.520.  For the next 40% of us, houses are $9,573 and mrthel totals $3,561.  See www.wealthandwant.com/issues/ wealth/50-40-5-4-1.htm
                for details.  The data is for 2004, taken from Currents and Undercurrents, by Arthur Kennickell, et al., from the Survey of Consumer Finances.

                Wyn


                Sean Brooks wrote:

                1) it's a mistake to say that land is the most valuable asset people have:
                (US figures)
                Median home price is ~$220,000.
                Land portion of this is probably 30% - $66,000 - or less.
                So already, their home, at $154,000 is worth more than their land.

                2) Their land, at $66,000, might have an annualized value of $6,600/y.
                The median 4 person household income in the U.S. $65,000/y, 10x the value
                of their land.





                So we have their labor, and their house, which are already worth more than
                their land.

                Furthermore, the initial steps towards LVT, a dual rate property tax,
                financially benefits more homeowners than it hurts.

                Likewise, an increase in LVT collected, concurrent with a reduction in wage
                taxes, should benefit the vast majority of the population, who pays far more
                than $6,600 in taxes on wages.

                Sean



                
                
                
                  Achenbaum
                webster, http://www.wealthandwant.com ... toward abolishing poverty
              • Mark Monson
                ... You seem to be arguing definitions not results. I m saying that increasing a tax on land must eventually wipe out selling price. This is the inevitable
                Message 7 of 26 , Nov 14, 2006
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                  Neil Gilchrist wrote:

                  >Mark,
                  >
                  >A tax rate of 100% of land price means that the annual tax rate equals the
                  >sale price by definition. Not zero.
                  >
                  You seem to be arguing definitions not results. I'm saying that
                  increasing a tax on land must eventually wipe out selling price. This
                  is the inevitable result. It doesn't matter what value attaches to the
                  site. Value is subjective. The essential fact is that if the land
                  title holder is required to pay full annual value, there is no value to
                  left to charge as selling price when he moves. At this point the land
                  title owner is essentially a tenant with special lease terms that
                  guarantee the location in perpetuity as long as he keeps up the rent
                  payments (except in cases of eminent domain, of course). Since the
                  incoming tenant gets the same terms, there is no opportunity left to be
                  capitalized as selling price.

                  > I don't understand the point of
                  >hypothesising a system where land value is reduced to zero. As I said in
                  >another paper I wrote in the Land Theory group, I think there is a value
                  >beyond any annual value; a value in owning something in perpetuity,
                  >something for which one should pay to acquire and be paid for surrendering.
                  >I think I had further arguments - I can look for it if you are interested.
                  >
                  >In a discussion with Nic Tideman the other day I realised that as the land
                  >value decreases due to the LVT rate increasing, it will get harder to
                  >accurately assess the land value as it will constitute an increasingly
                  >smaller proportion of the property value. That is a concern for me as it is
                  >important to me that the system works in practice. On the other hand it
                  >does not bother me too much because I doubt I'll see an LVT rate anywhere
                  >near 100%. However, it may have significance for your argument when you
                  >consider that an assessment of value while based on market data and building
                  >costs still has a subjective element. Margin for error means that when a
                  >property sells for say $250,000 the assessment of $200,000 for improvements
                  >and $50,000 for land may not be exact but I would like to think accurate
                  >enough to instil confidence.
                  >
                  >

                  See my latest response to Dan Sullivan.

                  I'll address your other points in a future post.

                  Mark

                  >No one should be punished for having lent money. The system should not
                  >differentiate between those who borrow to buy and those that do not. What
                  >is equitable about favouring those who borrow over the thrifty who pay off
                  >their debts or save to buy? I have proposed a phased introduction. I assume
                  >that land values will trend up until LVT is introduced/increased/extended.
                  >Therefore those that buy latest will lose most. They will also have paid
                  >larger transfer taxes. If those that bought in the last year prior to LVT
                  >should be exempt. Those a year only pay a proportion of the LVT liability,
                  >say 20%. And so on. If it were phased in over 20 years - and I am not
                  >proposing that - a given land value would probably drop to what they worth
                  >20 years before introduction.
                  >
                  >A full land value tax will put land debtors in the position of owing
                  >their creditors as well as the taxing jurisdiction. Do the bankers have
                  >a moral basis for collecting land rent in the form of land debt? The
                  >state can decide who has the higher moral claim: bankers or producers.
                  >I would give debt relief to land owners at the expense of bankers.
                  >
                  >Fred says you can't invest in land, by which he probably means you can't
                  >improve it. I would argue that you must invest in land, i.e. commit money,
                  >in order to do anything with it, for example put improvements on it or
                  >cultivate it. I see a difference between that and speculation. Those who
                  >want to use land must purchase it. There is no blame in that. I can't even
                  >feel animosity to those who speculate. I think it is inevitably part of any
                  >purchase.
                  >
                  >Yes, I do believe that "Selling price appreciation is the problem". That is
                  >part of my argument. If under LVT the price you buy for is pretty much the
                  >same price you sell for, there is no unearnt income. If the price goes up a
                  >little and every year more LVT is paid as a result does it matter much. If
                  >the purchase price is negligible compared to average income, better still.
                  >
                  >Of course uninformed, ill-perceived interest will keep land owners from
                  >choosing LVT. You would have to be crazy to think otherwise. That does not
                  >mean one should be dishonest. It means on must inform, correct perceptions
                  >and address self interest. It is in everyone's self interest to have a
                  >wealthier happier community. Incomes will be higher, goods and services
                  >cheaper, crime lower, and so on. Their children will have better futures.
                  >You know the list.
                  >
                  >The system must be credible. The basis for calculating LVT must be based on
                  >empiric evidence not 'imputed'.
                  >
                  >The system must have a fair transition. Those who purchase most recently
                  >will lose the most. Imagine someone who has paid income taxes all their
                  >lives and then retires only to find income tax has gone and their land
                  >assets are then taxed.
                  >
                  >The system needs to be simple. No exemptions. No thresholds. Equity and
                  >progressivity can be addressed by a Citizen's Dividend.
                  >
                  >Taxing something that is theoretical - economic rent - is not credible.
                  >
                  >LVT starts with a low rate. Even were it true that land values would
                  >disappear given a particularly high rate it is not relevant. Why scare
                  >people with wild supposition out of some ideological purity. If we want any
                  >success let's talk about the benefits that will be seen at politically
                  >achievable tax rates. When we get those benefits lets move forward.
                  >
                  >Finally, let's not attack the people whose support we need. Most people are
                  >land owners. Let us address their concerns with sensitivity.
                  >
                  >Neil
                  >
                  >
                  >
                • Fred Foldvary
                  ... Yes, banks use fractional reserves, but much of the loaning comes from savings, people depositing their savings in bank accounts. If the loans are voided,
                  Message 8 of 26 , Nov 14, 2006
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                    Mark Monson wrote:
                    >>> we need a law that voids all private
                    >>> land debts so people won't be stuck
                    >>> paying twice

                    Fred Foldvary wrote:
                    >> Does that not steal from the lender?

                    > No. Bankers are not the producers of wealth that is
                    > lent. Nearly all of these funds are concocted
                    > through fractional reserve banking.

                    Yes, banks use fractional reserves, but much of the
                    loaning comes from savings, people depositing their
                    savings in bank accounts. If the loans are voided,
                    the banks will not be able to cash out savers who want
                    to withdraw their funds.

                    > Destroying land's value and land's debt will destroy
                    > bubble money and very little earned savings.

                    Do you have data on such savings?

                    > The greater crime is to allow creditors to
                    > receive this unearned flow of labor that rightfully
                    > belongs to producers.

                    Wages are not wiped out when banks loan out funds.
                    If the central bank creates new money, and these funds
                    are loaned out, the gains will go to the savers if the
                    banking system is competitive, as banks seek to
                    attract savings by offering higher interest or better
                    services than competitors, until the banks only make
                    normal profits.
                    Banks are intermediaries, collecting savings and
                    lending them to borrowers. They get paid for being
                    brokers, and the remaining gains go to savers.

                    What steals wages is
                    1) taxes on wages,
                    2) the lowering of wages by the movement of the margin
                    of production to less productive locations due to land
                    speculation,
                    3) price inflation greater than wage increases.

                    Wages deposited into bank accounts earn interest,
                    which then increases the wealth of the worker.
                    So long as it is done honestly, with full disclosure,
                    fractional reserve banking does no harm to the
                    economy.
                    The real money problem is central banking and the
                    governmental money monopoly.

                    Free-market fractional reserve banking would help the
                    economy by supplying currency in accord with its
                    demand by the public.

                    Fred Foldvary
                  • Edward Dodson
                    Ed Dodson with a comment... Without an active leasehold market for locations, determining the annual rental value of a parcel of land requires the assessor to
                    Message 9 of 26 , Nov 15, 2006
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                      Ed Dodson with a comment...

                      Without an active leasehold market for locations, determining the annual
                      rental value of a parcel of land requires the assessor to use a
                      capitalization rate common to other investment alternatives. In most markets
                      where there are land sales, the average annual increase in capitalized land
                      value can be calculated (selling price, less acquisition cost, less the
                      taxes assessed on the gain).

                      For the foreseeable future, it is unlikely that very many tax assessors will
                      get better at adjusting assessment values to accurately reflect market
                      values (Ted Gwartney excepted). Thus, the practical strategy is to get the
                      various levels of government that tax real estate to get to a land-only tax
                      base over some period of time. This will, in itself, squeeze out the
                      speculative profits of investing in land and holding it for resale. When we
                      begin to see fewer and fewer vacant parcel of land in an economically
                      vibrant area, we know that speculative rent is disappearing and the
                      community is approaching the point where the land market is responding to
                      competitive signals. At that point, market rents are in play; every
                      subsequent increase in the tax rate should see a subsequent decline in the
                      selling price of land. Land value, meaning the potential annual rental value
                      of a location, is likely to be rising as the potential for more revenue to
                      be generated by businesses at desired locations increases.

                      I also see a scenario where, even when the annual tax payment comes very
                      close to the full potential rental value, the selling price for locations
                      does not fall (or fall close to zero) in the near-term. The reason? Demand
                      for some specific locations is so high that purchasers are willing to pay a
                      premium to the seller above what the immediate return on investment
                      calculations warrant. The investor in whatever business is to be engaged in
                      is "speculating" that the volume of business will increase at an increasing
                      rate.
                    • Mark Monson
                      ... Right. There is a solution for that one too: nationalize the FDIC accounts. Take them off the bank s books and give them to the US Treasury. Individuals
                      Message 10 of 26 , Nov 16, 2006
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                        Fred Foldvary wrote:

                        > Mark Monson wrote:
                        > >>> we need a law that voids all private
                        > >>> land debts so people won't be stuck
                        > >>> paying twice
                        >
                        > Fred Foldvary wrote:
                        > >> Does that not steal from the lender?
                        >
                        > > No. Bankers are not the producers of wealth that is
                        > > lent. Nearly all of these funds are concocted
                        > > through fractional reserve banking.
                        >
                        > Yes, banks use fractional reserves, but much of the
                        > loaning comes from savings, people depositing their
                        > savings in bank accounts.
                        >

                        > If the loans are voided,
                        > the banks will not be able to cash out savers who want
                        > to withdraw their funds.
                        >
                        Right. There is a solution for that one too: nationalize the FDIC
                        accounts. Take them off the bank's books and give them to the US
                        Treasury. Individuals would keep their savings and the bankers would be
                        released from the liability as well as the assets from those accounts.

                        >
                        > > Destroying land's value and land's debt will destroy
                        > > bubble money and very little earned savings.
                        >
                        > Do you have data on such savings?
                        >
                        If I remember correctly, 70% to 90% of investment is in assets other
                        than labor production according to a recent Harper's magazine article by
                        Michael Hudson.

                        >
                        > > The greater crime is to allow creditors to
                        > > receive this unearned flow of labor that rightfully
                        > > belongs to producers.
                        >
                        (...)

                        > Banks are intermediaries, collecting savings and
                        > lending them to borrowers. They get paid for being
                        > brokers, and the remaining gains go to savers.
                        >
                        This should be the case but it is not presently the case that banks
                        collect and loan savings that represent prior labor. If this were true,
                        all land could be sold at current market price and the money used to buy
                        goods and services at current market prices. Obviously, this is
                        impossible. Many times in different places, land prices have generally
                        redoubled without a corresponding general inflation. The reason is
                        that banks create speculating money out of nothing that is then used to
                        bid up land.

                        Mark Monson

                        (...)
                      • Jeffery J. Smith
                        ... Yes! And in a competitive market, in exchange for their guarantee, they probably wouldn t have to pay depositors any interest, either. ... Then as those
                        Message 11 of 26 , Nov 18, 2006
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                          On Nov 16, 2006, at 3:19 PM, Mark Monson wrote:
                          >
                          > There is a solution for that one too: nationalize the FDIC accounts.
                          > Take them off the bank's books and give them to the US Treasury.
                          > Individuals would keep their savings and the bankers would be released
                          > from the liability as well as the assets from those accounts.

                          Yes! And in a competitive market, in exchange for their guarantee, they
                          probably wouldn't have to pay depositors any interest, either.

                          > Many times in different places, land prices have generally redoubled
                          > without a corresponding general inflation. The reason is that banks
                          > create speculating money out of nothing that is then used to bid up
                          > land.

                          Then as those recipients spend their ill-gotten gains, that bids up
                          everything else, eh? (tho' never as much as land got bid up)

                          SMITH, Jeffery J.
                          President, Forum on Geonomics
                          jjs@...; www.geonomics.org
                          Share Earth's worth to prosper and conserve.
                        • Neil Gilchrist
                          Mark, Yes, it is a definition, almost a truism. It is the result. It is backed by reasoning and formulas. It is supported by the academic economists on this
                          Message 12 of 26 , Nov 21, 2006
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                            Mark,

                            Yes, it is a definition, almost a truism. It is the result. It is backed
                            by reasoning and formulas. It is supported by the academic economists on
                            this list such as Fred and Nic. I have presented the arguments and the
                            maths. I should not need to do so again and will not be doing so. I am not
                            sure if it is because I have presented these arguments and maths badly or
                            whether some people are wedded so closely to an idea that nothing will sway
                            them that this discussion is still going on. You can keep making your
                            assertion as much as you like and it won't make it right. Let's see the
                            maths.

                            It is very important what value attaches to a site. It isn't a land 'let us
                            invent a figure' tax. It is a land 'value' tax.

                            Yes, value is subjective. I guess that means you are not one of the people
                            who were arguing that land value is the capitalized value of some unknown
                            future rents and some unknown future increase in value.

                            It does not matter that it is subjective. We are not interested in what
                            figure is in someone's head. We concern ourselves with what value the
                            market determines. A known value that can be proved objectively. The
                            buyer's subjective value of the land may have been higher than he or she
                            actually pays and the seller's subjective value of the land may have been
                            lower than the price received. They reach a price that they can agree on ot
                            there is no sale. Additionally, they are not alone. The presence of other
                            buyers and sellers in the market plays a major part in determining the
                            market price. A price that is on the public record.

                            The lawyers on the list will tell you that a lease must have a term. Why is
                            there this obsession with wanting to change the system of title? Do you
                            feel that telling people their land values will fall to zero is not enough
                            to ensure that there will never be political or poplar support for LVT that
                            you need to tell people who bought title so they would not be tenants that
                            they will become tenants again? I am surprised not to see people limping
                            around at Georgist conferences from shooting themselves in the foot. And a
                            few in wheel-chairs too, from shooting themselves in both feet.
                            Increasingly, it is of no surprise that we have been so unsuccessful. It is
                            a relief that the Greens and by contrast some hard-nosed economist are
                            starting to see the virtue of LVT. Unfettered by 19th century dogma they
                            are likely to be more influential.

                            I admire George for his ability to see what is essential and not complicate
                            matters by adding the unnecessary. It is not true for some of his
                            followers.

                            Neil


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                          • Harry Pollard
                            Ed, We have to beware of using market values for Rent. Rent is a general value. If we produce on (say) 10 land then with the same exertion we will finish up
                            Message 13 of 26 , Nov 22, 2006
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                              Ed,
                               
                              We have to beware of using market values for Rent.
                               
                              Rent is a general value. If we produce on (say) 10 land then with the same exertion we will finish up with10 more than marginal land with a Rent of zero. The fact that you, by virtue of your talent and experience, might build a far more profitable structure will not affect the Rent, though it might well affect the amount you can pay for the site..
                               
                              If this is Number One Park Avenue, then though I would do my best to take full advantage of the rent if I build there, it is likely that Donald Trump would build a much more profitable improvement than I.
                               
                              Actually, he did.
                               
                              So, although I can pay the Rent, Donald will be able to pay much more than I for the site. Does this mean that we should charge him more "Rent" because of his special skill and knowledge. If this is so, then our Rent collection will be collecting not only Rent but also wages from Donald.
                               
                              You know of the Danish street valuations (now used everywhere says Ted). Every lot gets the same valuation. Because Donald could and would pay a premium to get a particular lot on which to use his special skill, should the Rent assessment therefore rise on that one lot?
                               
                              Not according to the expert street valuers.
                               
                              Rent is the same whether Pollard or Trump wants the site. Remember the Rent is an extrinsic value created by the surrounding community. Pollard and Trump have nothing to do with it except as members of the community.
                               
                              I do think that in a Georgist city with 100% of the Rent collected, in due course, every site would be used. However, there will probably be a market for the land part of property, particularly in higher Rent locations..
                               
                              If it's getting close to the time for a building to be demolished, both Pollard and Trump will be able to bid for the right to demolish and rebuild from the existing owner. Because of Trump's professionalism, I think he could pay more than I for the right to demolish and build. So, he'll get it.
                               
                              I would think that there is likely to be a thriving market in land in a Georgist economy, but the prices won't be extraordinary. Trump paid more than $100 million an acre for the Park Avenue site. In a Georgist economy he might pay (say) a couple of hundred thousand dollars to the existing owner to get the sale. I couldn't afford it with my lesser skills.
                               
                               Paying the sweetener will not change the Rent valuation - which Trump would have to pay to the City of New York..
                               
                              One notes that in Las Vegas mammoth hotels bite the dust - literally - because big though they are they can't take advantage of escalating Rents. So, they are replaced with structures that can.
                               
                              I think in a Georgist economy we would find continual replacement of inefficient buildings especially so in the changeover from the present rather inefficient system.
                               
                              Hey! Unemployment might become an unknown word.
                               
                              Maybe we should spend more space on the economic effects of our change and less on the revenue prospects. The economic effects are what we have to sell.
                               
                              Harry
                               
                              *********************************
                              Henry George School of Los Angeles
                              Box 655  Tujunga  CA  91042
                              818 352-4141
                              *********************************

                              From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On Behalf Of Edward Dodson
                              Sent: Wednesday, November 15, 2006 8:22 AM
                              To: 'Mark Monson'; LandCafe@yahoogroups.com
                              Subject: RE: [LandCafe] No land price with full land tax - simply is not true

                              Ed Dodson with a comment...

                              Without an active leasehold market for locations, determining the annual
                              rental value of a parcel of land requires the assessor to use a
                              capitalization rate common to other investment alternatives. In most markets
                              where there are land sales, the average annual increase in capitalized land
                              value can be calculated (selling price, less acquisition cost, less the
                              taxes assessed on the gain).

                              For the foreseeable future, it is unlikely that very many tax assessors will
                              get better at adjusting assessment values to accurately reflect market
                              values (Ted Gwartney excepted). Thus, the practical strategy is to get the
                              various levels of government that tax real estate to get to a land-only tax
                              base over some period of time. This will, in itself, squeeze out the
                              speculative profits of investing in land and holding it for resale. When we
                              begin to see fewer and fewer vacant parcel of land in an economically
                              vibrant area, we know that speculative rent is disappearing and the
                              community is approaching the point where the land market is responding to
                              competitive signals. At that point, market rents are in play; every
                              subsequent increase in the tax rate should see a subsequent decline in the
                              selling price of land. Land value, meaning the potential annual rental value
                              of a location, is likely to be rising as the potential for more revenue to
                              be generated by businesses at desired locations increases.

                              I also see a scenario where, even when the annual tax payment comes very
                              close to the full potential rental value, the selling price for locations
                              does not fall (or fall close to zero) in the near-term. The reason? Demand
                              for some specific locations is so high that purchasers are willing to pay a
                              premium to the seller above what the immediate return on investment
                              calculations warrant. The investor in whatever business is to be engaged in
                              is "speculating" that the volume of business will increase at an increasing
                              rate.

                            • Edward Dodson
                              Harry Pollard wrote: Ed, We have to beware of using market values for Rent. Ed here: OK. I read thru your scenario that followed, Harry, but I am having a
                              Message 14 of 26 , Nov 23, 2006
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                                Harry Pollard wrote:

                                Ed,
                                We have to beware of using market values for Rent.

                                Ed here:
                                OK. I read thru your scenario that followed, Harry, but I am having a
                                problem making any connection with what I wrote earlier.

                                You write:
                                So, although I can pay the Rent, Donald will be able to pay much more than I
                                for the site. Does this mean that we should charge him more "Rent" because
                                of his special skill and knowledge. If this is so, then our Rent collection
                                will be collecting not only Rent but also wages from Donald.

                                Ed here:
                                No disagreement. What I thought I was saying is that even where the full
                                rent is being publicly collected, a price could be charged to acquire the
                                deed because of some special characteristic of the land parcel. You always
                                define land as "a location with an address." Well, what if the address is
                                "One Rodeo Drive" or "One Wall Street" or "One Trafalgar Square"?


                                You wrote:
                                I do think that in a Georgist city with 100% of the Rent collected, in due
                                course, every site would be used. However, there will probably be a market
                                for the land part of property, particularly in higher Rent locations.

                                Ed here:
                                Agreed. One reason is that some landowners have very deep pockets and very
                                huge incomes from other sources. They might own a townhome in Manhattan and
                                want the adjacent parcel for a yard or "Japanese garden," or to park their
                                Rolls Royce.
                              • Wetzel Dave
                                Harry, You write: I do think that in a Georgist city with 100% of the Rent collected, in due course, every site would be used. Used for what? Yes jobs,
                                Message 15 of 26 , Nov 24, 2006
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                                  Harry,
                                  You write: "I do think that in a Georgist city with 100% of the Rent
                                  collected, in due course, every site would be used."

                                  Used for what?
                                  Yes jobs, retail and homes but I'd also like to see some derelict urban
                                  sites used for leisure purposes, urban farms, wildlife sanctuaries,
                                  parks etc. These uses will not capture land value directly as they will
                                  not produce revenues with which to pay rent but they will increase the
                                  value of other sites in the neighbourhood.

                                  When I was the Leader of Hounslow Council (pop. 200,000) we did create
                                  an urban farm close to Heathrow airport on land which would have had a
                                  high value as freight forwarding offices and warehousing, a wildlife
                                  trust on land in Chiswick with unique flora and fauna on which the owner
                                  wanted to develop expensive offices and also a community swimming pool
                                  on land earmarked for housing.

                                  Dave

                                  Dave Wetzel,
                                  Vice-Chair, TfL
                                  020 7126 4200


                                  -----Original Message-----
                                  From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On
                                  Behalf Of Harry Pollard
                                  Sent: Wednesday, November 22, 2006 7:54 PM
                                  To: 'Edward Dodson'; LandCafe
                                  Subject: RE: [LandCafe] No land price with full land tax - simply is not
                                  true

                                  Ed,

                                  We have to beware of using market values for Rent.

                                  Rent is a general value. If we produce on (say) 10 land then with the
                                  same exertion we will finish up with10 more than marginal land with a
                                  Rent of zero. The fact that you, by virtue of your talent and
                                  experience, might build a far more profitable structure will not affect
                                  the Rent, though it might well affect the amount you can pay for the
                                  site..

                                  If this is Number One Park Avenue, then though I would do my best to
                                  take full advantage of the rent if I build there, it is likely that
                                  Donald Trump would build a much more profitable improvement than I.

                                  Actually, he did.

                                  So, although I can pay the Rent, Donald will be able to pay much more
                                  than I for the site. Does this mean that we should charge him more
                                  "Rent" because of his special skill and knowledge. If this is so, then
                                  our Rent collection will be collecting not only Rent but also wages from
                                  Donald.

                                  You know of the Danish street valuations (now used everywhere says Ted).
                                  Every lot gets the same valuation. Because Donald could and would pay a
                                  premium to get a particular lot on which to use his special skill,
                                  should the Rent assessment therefore rise on that one lot?

                                  Not according to the expert street valuers.

                                  Rent is the same whether Pollard or Trump wants the site. Remember the
                                  Rent is an extrinsic value created by the surrounding community. Pollard
                                  and Trump have nothing to do with it except as members of the community.

                                  I do think that in a Georgist city with 100% of the Rent collected, in
                                  due course, every site would be used. However, there will probably be a
                                  market for the land part of property, particularly in higher Rent
                                  locations..

                                  If it's getting close to the time for a building to be demolished, both
                                  Pollard and Trump will be able to bid for the right to demolish and
                                  rebuild from the existing owner. Because of Trump's professionalism, I
                                  think he could pay more than I for the right to demolish and build. So,
                                  he'll get it.

                                  I would think that there is likely to be a thriving market in land in a
                                  Georgist economy, but the prices won't be extraordinary. Trump paid more
                                  than $100 million an acre for the Park Avenue site. In a Georgist
                                  economy he might pay (say) a couple of hundred thousand dollars to the
                                  existing owner to get the sale. I couldn't afford it with my lesser
                                  skills.

                                  Paying the sweetener will not change the Rent valuation - which Trump
                                  would have to pay to the City of New York..

                                  One notes that in Las Vegas mammoth hotels bite the dust - literally -
                                  because big though they are they can't take advantage of escalating
                                  Rents. So, they are replaced with structures that can.

                                  I think in a Georgist economy we would find continual replacement of
                                  inefficient buildings especially so in the changeover from the present
                                  rather inefficient system.

                                  Hey! Unemployment might become an unknown word.

                                  Maybe we should spend more space on the economic effects of our change
                                  and less on the revenue prospects. The economic effects are what we have
                                  to sell.

                                  Harry

                                  *********************************
                                  Henry George School of Los Angeles
                                  Box 655 Tujunga CA 91042
                                  818 352-4141
                                  *********************************
                                  _____

                                  From: LandCafe@yahoogroups.com [mailto:LandCafe@yahoogroups.com] On
                                  Behalf Of Edward Dodson
                                  Sent: Wednesday, November 15, 2006 8:22 AM
                                  To: 'Mark Monson'; LandCafe@yahoogroups.com
                                  Subject: RE: [LandCafe] No land price with full land tax - simply is not
                                  true
                                  Ed Dodson with a comment...

                                  Without an active leasehold market for locations, determining the annual
                                  rental value of a parcel of land requires the assessor to use a
                                  capitalization rate common to other investment alternatives. In most
                                  markets
                                  where there are land sales, the average annual increase in capitalized
                                  land
                                  value can be calculated (selling price, less acquisition cost, less the
                                  taxes assessed on the gain).

                                  For the foreseeable future, it is unlikely that very many tax assessors
                                  will
                                  get better at adjusting assessment values to accurately reflect market
                                  values (Ted Gwartney excepted). Thus, the practical strategy is to get
                                  the
                                  various levels of government that tax real estate to get to a land-only
                                  tax
                                  base over some period of time. This will, in itself, squeeze out the
                                  speculative profits of investing in land and holding it for resale. When
                                  we
                                  begin to see fewer and fewer vacant parcel of land in an economically
                                  vibrant area, we know that speculative rent is disappearing and the
                                  community is approaching the point where the land market is responding
                                  to
                                  competitive signals. At that point, market rents are in play; every
                                  subsequent increase in the tax rate should see a subsequent decline in
                                  the
                                  selling price of land. Land value, meaning the potential annual rental
                                  value
                                  of a location, is likely to be rising as the potential for more revenue
                                  to
                                  be generated by businesses at desired locations increases.

                                  I also see a scenario where, even when the annual tax payment comes very
                                  close to the full potential rental value, the selling price for
                                  locations
                                  does not fall (or fall close to zero) in the near-term. The reason?
                                  Demand
                                  for some specific locations is so high that purchasers are willing to
                                  pay a
                                  premium to the seller above what the immediate return on investment
                                  calculations warrant. The investor in whatever business is to be engaged
                                  in
                                  is "speculating" that the volume of business will increase at an
                                  increasing
                                  rate.
                                • Harry Pollard
                                  Dave, Below in red. Harry ********************************* Henry George School of Los Angeles Box 655 Tujunga CA 91042 818 352-4141
                                  Message 16 of 26 , Nov 25, 2006
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                                  • Edward Dodson
                                    Dave Wetzel wrote: ... I d also like to see some derelict urban sites used for leisure purposes, urban farms, wildlife sanctuaries, parks etc. These uses will
                                    Message 17 of 26 , Nov 26, 2006
                                    • 0 Attachment
                                      Dave Wetzel wrote:

                                      ... I'd also like to see some derelict urban
                                      sites used for leisure purposes, urban farms, wildlife sanctuaries,
                                      parks etc. These uses will not capture land value directly as they will
                                      not produce revenues with which to pay rent but they will increase the
                                      value of other sites in the neighbourhood.

                                      When I was the Leader of Hounslow Council (pop. 200,000) we did create
                                      an urban farm close to Heathrow airport on land which would have had a
                                      high value as freight forwarding offices and warehousing, a wildlife
                                      trust on land in Chiswick with unique flora and fauna on which the owner
                                      wanted to develop expensive offices and also a community swimming pool
                                      on land earmarked for housing.

                                      Ed Dodson here:
                                      As someone who spent over 30 years in the community development arena, I
                                      came to appreciate the value of the planning process -- so long as people
                                      affected by the decisions are materially involved in making those decisions.
                                      Until the last 20 years or so that we not the case here in the U.S. (and, I
                                      suspect, even less the case in the U.K.).

                                      The older cities here in the U.S. grew based on the transportation means and
                                      technologies available in each era. Until relatively recently, we had almost
                                      no concerted effort of historical preservation. The fact that our Eastern
                                      Seaboard cities have historical districts still intact is more an accident.
                                      For several decades, those of any means abandoned the cities for surrounding
                                      towns that had little or no polluting industries, leaving workers as tenants
                                      in crumbling 18th and 19th century buildings. Then, when the industries shut
                                      down and left, many of these buildings ended up vacant, boarded-up and very
                                      often demolished. Gradually, slowly, painfully, the city neighborhoods with
                                      once-grand residential structures attracted a new category of urban dweller
                                      -- people who appreciated the cultural amenities of the cities, who worked
                                      in the professions and had plenty of income to acquire and return
                                      deterioriated shells to better-than-original condition.

                                      These residents are far more politically involved and influential. They
                                      demand more open space in their neighborhoods. They demand better public
                                      services. The main outcome was rapid gentrification of many neighborhoods,
                                      with lower income renters the first to be displaced, followed by lower
                                      income homeowners (which were few and far between in most cities).

                                      A reaction of sorts then occurred. Advocates for the needs of lower income
                                      households began to organize to get government to provide funds to subsidize
                                      housing construction and rehabilitation, mostly in neighborhoods where the
                                      municipal government had acquired ownership of properties abandoned by
                                      owners. To attract buyers to areas where schools might not be considered
                                      very good and where few stores and professional services were closely
                                      available, the price for housing was set so that a household with an income
                                      of, say, 60-80% of the city's median income would be eligible; in this way,
                                      the housing units were rationed. Some of these programs were structured so
                                      that the subsidy came in the form of a forgivable, zero-interest loan, a
                                      portion of which was forgiven every year the occupants remained in the
                                      property. Also, some programs have had resale restrictions (e.g., the
                                      housing unit had to be resold to a household with the same maximum allowable
                                      income as a percentage of the city's median).

                                      In already-gentrifying areas, some degree of mixed-income development is
                                      being assured by the use of inclusionary zoning requirements on developers.
                                      If a developer wants to construct 100 "market rate" units, the city might
                                      approve an increase in density to 125 units but require that 25 units be
                                      priced to be affordable to households up to some maximum of the city's
                                      median. Here's an irony for you. In a high cost city like New York, most
                                      subsidy programs set the household income limit at 165% of the area median.
                                      There are other high cost housing markets in the U.S. with similarly high
                                      income limits.

                                      My observation is that these efforts, though all struggling to achieve
                                      critical mass effect because of our destructive tax system, can be
                                      constructive -- but only if the process if one of consensus building and
                                      inclusive. Top down decisions made by planners sitting somewhere in
                                      isolation have in most cases only accelerated the rate of community
                                      devastation.
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