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Thread: Why isn't property tax based solely on lot size?

  1. #1
    Cyburbian stroskey's avatar
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    Why isn't property tax based solely on lot size?

    I don't know much about property tax systems but wouldn't it make sense to base the taxes solely on the size of the parcel, minus any building value? By doing it this way wouldn't you encourage denser development?

  2. #2
    I'd actually feel bad for land speculators, Wal-Mart and any other large landowners in that may be in the taxing district, such as farmers. High-rise condo owners would get a windfall though. So you're right. It would encourage density.

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    Chairman of the bored Maister's avatar
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    Way too many factors other than lot size affect property values. Too complex for a one-size-fits-all formula.

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    Super Moderator kjel's avatar
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    Quote Originally posted by Maister View post
    Way too many factors other than lot size affect property values. Too complex for a one-size-fits-all formula.
    I agree. While lot size is a factor in assessing the value of a property it's only one. Building size, character, and condition, location of the property, at which rate it's taxed, market comps, all play a role. Density really should be encouraged through zoning and not taxation.
    "He defended the cause of the poor and needy, and so all went well. Is that not what it means to know me?" Jeremiah 22:16

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    Cyburbian Raf's avatar
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    Quote Originally posted by stroskey View post
    I don't know much about property tax systems but wouldn't it make sense to base the taxes solely on the size of the parcel, minus any building value? By doing it this way wouldn't you encourage denser development?
    EPIC FAIL.

    So I suppose we tax the 100 acre cattle ranch or 60 acre the orchard more than 5,000 sf lot, yet the 5,000 sf lot probably utilizes more "services" than both of those uses? How is that equitable? What about the factories? Commercial spaces, etc? Not as simple is it?
    Men do dumb $hit... it is what they do to correct the problem that counts.

  6. #6
    Cyburbian stroskey's avatar
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    Quote Originally posted by CPSURaf View post
    EPIC FAIL.

    So I suppose we tax the 100 acre cattle ranch or 60 acre the orchard more than 5,000 sf lot, yet the 5,000 sf lot probably utilizes more "services" than both of those uses? How is that equitable? What about the factories? Commercial spaces, etc? Not as simple is it?
    Based on your logic the person who adds on a 3 stall garage should pay more taxes because...? How does adding building value affect, in any way, the amount of services they use? In regards to using more services, that's why we pay water and sewer bills. You could have a limitation for farming operations but by placing the taxation solely on size would even out school district finances, as well.

    Edit - here is a GREAT exaple of why it should be on lot size alone: http://www.alaskadispatch.com/voices...ocial-behavior

    "For example: Currently, buildings are assessed at a greater rate, and count for more of our property tax, than land. (My house is assessed at $131.19 per square foot, while the land is assessed at $3.50.) This provides an incentive for people to live on large plots of undeveloped land and to keep the assessed value of their houses low. And, since assessors usually judge only by external appearances, it provides an incentive for people to keep their properties looking ugly and run-down.

    Whether meaning to or not, we have chosen to promote large, undeveloped lots (and the resulting increase in driving time, since people will live farther away from each other) and an ugly, degraded human environment. I would support a property tax that was based on lot size rather than building value, since the current tax structure promotes large lots, few capital improvements, horizontal rather than vertical growth, and land speculation."

  7. #7
    Cyburbian Brocktoon's avatar
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    Most states tax property tax are based in part on use. Commercial, industrial, ag, and residential pay different rates. In AZ ranchers, farmers and mines pay very little in property taxes. In fact many large land owners will lease out some of the land to a farmer or allow a few heads of cattle to graze and have the land classified as ag, thus greatly reducing their tax bill.

    If we taxed purely on land wouldn't most large commercial and retail owners fight for less parking?

    I do agree that property tax should fall more on land and less on just structures but overall property tax is a fair and progressive tax that works well and, in most cases, does not fluctuate greatly.
    "If you don't like change, you're going to like irrelevance even less" General Eric Shinseki

  8. #8
    Cyburbian CJC's avatar
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    I don't like the idea of basing the tax on lot size, but basing it on land value (ignoring all improvements) would be far superior to the most common methods used now, IMO, as it would provide a direct incentive for land to be used for the highest use (and severely penalize vacant land).

    I don't really think this kind of thing can work with regional and/or state-level cooperation though, because you'd definitely need things like an urban growth boundary.

    I agree with Brocktoon that most existing property tax systems are pretty fair and work fairly well, but don't get me started on how incredibly broken the California property tax system is, and how many terrible, terrible incentives have been built into the system since the passage of prop 13 in the late 70's...
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  9. #9
    Cyburbian wahday's avatar
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    Quote Originally posted by stroskey View post
    Based on your logic the person who adds on a 3 stall garage should pay more taxes because...? How does adding building value affect, in any way, the amount of services they use? In regards to using more services, that's why we pay water and sewer bills. You could have a limitation for farming operations but by placing the taxation solely on size would even out school district finances, as well.
    The idea here is that a high rise apartment building, for example, simply has a larger impact (and a larger subsequent cost to the CIty or other municipality) because of the intensity of use. Especially if compared to a single family dwelling.

    Yes, we pay water and sewer bills, but when the high rise goes in, they may have to increase the supply and effluent capacity (not something you would see in an individual bill). If families live in the apartment building, more of them or going to school. Out here, new development on the fringe of the city (where many homes or apartment buildings are going in) often requires the city to build and staff a new school plus transport children to and from, etc.. The apartment building has more traffic and may require a controlled intersection to be installed, a street to be widened, more frequent road repairs, etc. Electrical usage is higher. Will a higher capacity line need to be run? How will all of this be paid for? More fire and police are required in areas where more people live. And on and on.

    I think that is the idea behind our current property tax system. I'm not opposed to considering other mechanisms, but I think just basing it on the size of the lot is not going to solve these particular problems about paying for services.
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  10. #10
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    Land Value Taxation is worth exploring!

    Taxing land according to its value -- not its square footage! -- has a lot of merit. First, it is not passed along to tenants; it is a direct tax, proportionate to the value one receives from one's community.

    An acre in the middle of things can be worth awesome amounts. There is an acre in midtown Manhattan which is said to be worth $400,000,000 to $1,200,000,000, as a teardown. An acre of good farmland might be worth $5,000. An acre downtown in a small town would be worth considerably more than that $5,000. Taxing all three on the basis of their size makes little sense to me.

    But the landholder doesn't contribute to the value of the land itself, and I can't see why we should gift to him the value the entire community creates by its presence and its investment of tax dollars in infrastructure and services which create most of the land value.

    This is not a new idea. It is most commonly associated with the American economist and social philosopher Henry George -- but comes out of a much longer continuum of ideas.

    Pennsylvania has had the enabling legislation for a form of this for nearly 100 years, and perhaps 20 towns and cities -- most notably Harrisburg -- use it, taxing land values at much higher millage rates than they do building values. This has helped revitalize some former steel towns, and has a lot to recommend it. Check out urbantools.org for more information.

  11. #11
    Cyburbian
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    Quote Originally posted by LVTfan View post
    Taxing land according to its value -- not its square footage [...]
    I was just about to say the same thing. Taxing only the value of the land, and not include the value of the building would lead to more efficient development. Many would go much further and suggest that the entire tax system should be based on this and eliminate income tax.

    Here are some links that may be of interest to you:
    New Rules Project
    Land Value Tax - Wikipedia
    Henry George Foundation

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