Homeownership: Dangling a Contrarian View From a Land Value Tax Perspective
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Incentive Taxation

Homeownership: Dangling a Contrarian View From a Land Value Tax Perspective

The American Dream: Levittown 1948

UrbanTools (as the outreach arm of the Center for the Study of Economics) has successfully helped communities discover that land value taxation is a fair and equitable way to reduce the tax burden on the poor, the middle class and productive citizens.  

By deploying local LVT, we demonstrate in policy the fact that there is an alternative to tax systems that keep people down in force communities to struggle to pay for the basic bills to keep our local societies going.

The results have been low key considering the local nature of these reforms, but are replicable and empirically provable: Allentown Pennsylvania’s poorest neighborhoods  have seen their tax bills reduced significantly since a popular vote introduced LVT in 1996. Harrisburg’s Central Business District has seen significant and steady growth since 1980, even with its attendant problems. The growth spurted during those years immediately following expansion of the ratio of land tax to building tax. We could go on.

UrbanTools, concentrating on the preservation and prosperity of community has considered some of the new thinking on community in the past few years. The influential book and “teaching moment” titled “Bowling Alone” by Robert Putnam demonstrates with empirical research that most systems of formal social cohesion – think the Order of the Odd Fellows, company picnics, New Orleans brass bands or German lieder singing associations – that came into being in the late 19 or early 20 century has been faltering.

We Used to Do It Together:New Orleans and Grand Island Nebraska early 1900s

When that trend collided with the greatest of bubble collapses (the 2008 housing crash) it set into place a disturbing world of people with no equity losing their homes, people with opportunities to migrate forced to stay in an unsellable house, and no real “social capital” framework to fall back on. Homeownership – touted as the solution to all things financial, civic and personal – became a weight and a negative, with personal choices for escape and retrenchment taken away by obligations to lenders and banks.

Investor James Altucher wrote an essay ridiculing the benefits of homeownership. While ridicule has its limits, and one can easily argue the validity that the landlord does not roll taxes and mortgages into the rent one would pay, Altucher’s pitch for renting seems to fit the tenor of the times.  Americans in particular need to be able to migrate into move the way they used to in the mid to late 1800s renting makes that possible. It also keeps cash active, as opposed to being locked away in an inflated piece of land and building.  There is a short interview with Altucher on the Daily Ticker that is breezy yet serious that lays out his case. Perhaps not coincidentally, Scottrade the DIY investment house sponsors the segment; perhaps a subtle suggestion of where one ought to put their money!

There is no denying that real estate in the past 10 years and counting has been a demoralizing and damaging blight for many in the United States.  In their heads and hearts, Americans still believe we’re in a recession, and housing starts and sales are still limp.  There is a sense of permanence in the despair.

So how does LVT fit into all of this? A robust LVT implemented at significant rates while reducing the taxation of wages and commerce can free both labor and capital, giving labor (people) and added benefit of being able to go where the action is into a rental unit or house where the leasing parties are not paying tax on the structure (but certainly on the land values, thereby obviating the practice of profiting by letting a structure go to rack and ruin). 

There is already evidence that the overbuilt and overheated real estate suburban/McMansion markets of Arizona, California’s inland Empire, and Nevada are converting in the blink of an eye to rental and even subdivided rental units.  Massive forces have battered the pyrite  American Dream sloganeering of the real estate industry; time for approaching and designing a new model that fits new economic realities, and provides a real freedom for American families.

10 Comments to Homeownership: Dangling a Contrarian View From a Land Value Tax Perspective:

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Reny on Tuesday, October 02, 2018 3:25 AM
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