Why? Because apparently they need some more incentive to keep units occupied. Also, even though a property might be vacant, there’s still imputed rental income there. Its owner is just receiving it in the form of enjoying the unit for himself instead of receiving an actual rent check from a tenant. That imputed rent ought to be taxed like any other income.
Income tax when you aren’t receiving an income is a weird idea.
It sounds like the author wants a land tax, but hasn’t ever heard the term.
Another term is a vacant homes tax, something Vancouver and Toronto in Canada are using.
These sorts of narrow, “feel-good” taxes are the wrong way to go. People find loopholes to avoid paying them.
Georgist land value tax (LVT) is straightforward and cannot be avoided. It incentivizes owned land to be utilized, otherwise it becomes a huge liability. It does not disincentivize improvements (building stuff) because taxes are tied to underlying land values, not improved property value.
For those who are interested enough to read some fairly dense text on the topic here is a website for you. land value taxation: urban land values
Isn’t that just effectively another property tax where it’s needed? Afaik the issue isn’t people sitting on empty land, it’s sitting on empty housing.
Property taxes discourage building. Empty land is really cheap, property tax wise. Once you build on the land, property taxes go way up. This discourages you from building on the land.
Land value tax is the opposite. The tax you pay is based on how much the land is worth, based on its location and supply/demand. An empty lot in NYC would cost the same in LVT as if it had a big apartment full of renters. This makes it very expensive to hold on to unless you’re going to build on it.
The same applies for improvement. If you own a plot with a single family house on it in an area where demand is skyrocketing, your LVT is going to shoot up along with it. This encourages you to either tear it down to build apartments or sell it to someone who will.
The really interesting part about LVT is that it paradoxically makes housing more affordable. One of the biggest problems with the current property tax system is that people’s taxes don’t go up when the value of their property increases. This leads to little old ladies sitting on multi million dollar homes and paying almost no taxes at all in places like the Bay Area. Land Value Tax would force tons of those houses onto the market, causing prices to go down due to increased supply. Truly expensive areas would also have to have apartments built to cover the tax.
The other nice thing about LVT is that landlords can’t pass it on by raising rent. Since the cost of rent in the area directly determines the value of the land, rent increases just turn into tax increases. At some point landlords have to stop increasing rent otherwise everyone would move out and then they couldn’t afford the taxes, so this leads to an equilibrium.
The only thing left to solve in this system is to make sure taxes are used to benefit regular people and not wasted.
The owner of an apartment is always receiving income from it, either in the form of the rent check or whatever utility it provides for him to keep it to himself.
I don’t like land taxes and other property taxes because I don’t think there’s a good way to apply those taxes progressively. Rather, if we just take the imputed rent of a given asset (land, building, car, etc.) and add that to the taxpayer’s income, the the progressive income tax can just do its thing.
Btw Switzerland had this low though they are planning to get rid of it soon
Land value taxation is inherently progressive. That’s probably why it’s never been implemented.
Is it really? Isn’t a land value tax suppose to be flatly applied to the value of land and not change with respect to the adjusted gross income of the land owner?
You don’t need to adjust for income. How do you get high value land with a low income? How do you own high value land and not derive an income from it? You’re imagining an extreme edge case of some family that’s been passing high value land down, generation after generation, without ever leveraging this advantage into financial success.
The more valuable the property, the larger a component of that value that tends to be in the value of the location itself, as opposed to the capital improvements to that location. Low income housing, as cheaply built as it is, is built in an even cheaper location. Conversely, a house but for higher income people is built more expensively, but even greater is the access to good schools, jobs, shopping, low (blue collar) crime rates, and so on that a high value location provides.
And that’s just residential real estate, which is almost people even think about. With commercial and industrial sites, location becomes even more important.
People who talk this way don’t know what land value is. They imagine there is a relationship to quantity, when location is almost the entire driver. Maybe a thousand square feet of space in upper Manhattan or San Jose or something is comparable to a hundred acres in rural Wyoming, or wherever.
And what about the poor in cities? They already pay a land value tax… to the owners of the land. You will say that if the owners are taxed, they will raise rents… but if they can just raise rents like that, why haven’t they already? Normally, a tax can be “passed on” because a tax on a thing affects the supply of that thing: the tax raises costs, which lowers profits, which drives capital out of that industry and into another, which reduces the amount being produced, which allows the higher price.
But land is fixed in supply. If you’re imagining a way of increasing or reducing the supply, you’re not thinking about land, but capital improvement to it. The supply can be neither increased nor decreased. Its existence is not dependent on any industry or thrift or other service on the part of the landowner and, as such, any income derived simply from owning a location and leasing it out to others is unearned. It’s essentially extortion, one person renting to another the “privilege” of existing, and if there are any landowners not collecting the full value that can be collected, it is either because they haven’t found the highest price yet, or out of the kindness of their hearts.
I’m not sure what you’re getting at. My property tax bill has separate components for the land and the improvements upon it. I’m sure that a larger portion of my income goes to paying it than some of my neighbors.
No, he’s receiving value from it. That’s not the same thing as income. You can’t tax a percentage of value, only actual money.
You’re guessing how much rent he could be collecting and taxing a percentage of the imaginary rent payments… You’re really bending over backwards here to implement a property tax or vacancy tax but with a bunch of extra steps.
Wrong. Basically everyone who’s ever paid property taxes has been taxed on value. Even though I haven’t sold it or nor plan to anytime soon, I owe increased taxes because the estimated value of it has gone up.
Right, but you pay property taxes based on the assessed value of the property, you don’t also pay income taxes on property unless that property is actually generating an income.
For example, you don’t have to figure how much you could hypothetically rent your home for if you weren’t living in it and add that to your income, even if you are wealthy enough to have a second home or summer home or something. It really just sounds like NY should significantly raise the property tax rate for unoccupied residential properties other than a primary residence, especially unoccpied residential properties owned by a commercial entity.
Agreed, I’d drastically increase the vacant property taxes such that they might approximate income taxes for a leased property. Seems simpler for the same effect.
Owning a house that you don’t inhabit is weirder.
So renting a house for your vacation is also weird?
It’s certainly wasteful. If people are going without any proper shelter, then having extra, mostly vacant housing to yourself should be discouraged.
This right here. The US averages some thirty unoccupied houses for every homeless person. A lot of those are just owned by investment firms who will sit on them because housing is treated as an investment first and a human need second. It’s not a supply problem, it’s a fucking greed problem.
That’s what I think too. A law where you pay more tax for additional properties you own on top of your first home. I don’t know enough about the housing market to know if such a law would actually help, but at first glance it does seem like it’d break up some of the corporate slum lord businesses around the US