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No it wouldn’t. Ordinary property taxes do total value. A LVT does land (presumably at a high rate).
In this case a property tax would do the tax at market value as built. Existing Capex can get hurt bad in a lvt.
This isn’t making any sense to me. My understanding is that normal property tax taxes market value (or at least an assessed opinion of market value) as built, which necessarily includes the value of the land plus the value of the improvements. LVT taxes just market value (or assessed opinion thereof) of the land excluding improvements. LVT could be set at such a higher rate that it eclipses the differences between the two but that’s just a question of rates, not an actual LVT vs. property value tax question. It’s just not possible that appreciation of land value would result in a greater tax increase than appreciation of land value PLUS the tax on the improvements directly.
You are forgetting about the tax rate. Georgists aren’t talking about the current rates. They want to capture 100% of the land value. So the appraised land value on that property would be a little lower than market value but the tax rate my guess would be 3-4x. (Florida is like 1.2-1.5% of property value. Real estate typically trades around a 5 cap, but that’s post current taxes. So a LVT is likely about 6.5%)
I initially used the Mandarin Oriental in Miami as an example of how this could occur. Since construction costs on the prior building is probably 200m. They just tore it down which means land values increased over property values. And are building much taller (from 10-15 stories to 50+).
Under the current regime they would have paid about 1.5% tax on 200m or $3m a year. Under an LVT their taxes would have been going up as land values increased. At the point of tearing it down the land value would need to be worth 200m but under LVT their tax would be 13m a year (estimate on 6.5% rate).
The tear down point wouldn’t be the painful time since without tax you’re still tearing it down. It’s the point where the raw land value climbed to 150m and your tax is like 9.75m. When you built the Hotel it was like 30m land + 170m capex for a total value of 200m. Your income on the hotel isn’t increasing because land values went up because you still have the same fixed supply of hotel rooms. But now your tax has increased a lot and is capturing most of your profits.
This is actually a fair description of land values in Miami. They have appreciated 5-15X in the last 15 years.
I see. I didn’t realize Georgists are generally setting the rate at 100% of the value. This makes me understand the opposition to LVT much more, when before it just seemed plainly superior to normal property taxes
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