It seems like it would be pretty hard to define a single reasonable delay period for land sales. An example case where a large delay would be justifiable is: a business manufactures cars, and has a single factory that makes some critical component. The value of their business is effectively zero if they can’t manufacture that component. But it takes N years and D dollars to get zoning, environnemental, safety etc approvals for a new factory (and also to actually build it and get it running as smoothly as the last one, and hire competent staff, and lay off the old staff...). Having a variable “reasonable” delay and switching-cost compensation might work, but that sounds like a recipe for endless litigation.
On top of that, land can have network effects within a single owner—if a business builds 5 codependent factories and has to sell one of them, but cannot feasibly replace the one sold with something new nearby, each of the factories would have to be valued at the entire value of the network, multiplying your tax burden by the number of parcels your network is broken into.
I agree that the way we do land now is not good, but at first glance I don’t see a way to fix this proposed system without a bunch of patches with their own problems.
Leaving aside delays, this does get at a point I noticed wasn’t obviously addressed in that paper which is what to do about very seasonal things. The example I thought of (rather less macabre) was an umbrella in a rainstorm. I don’t think it’s sensibly applicable to most personal property.
Agreed, but the timing issues seem applicable to businesses’ property as well. Sudden unpredictable spikes in value (e.g. of a mine for a rare metal that somebody figured out a new use for) could result in a lot of churn and removes the upside (but not downside!) variance in asset value.
By this, do you mean something like: when I purchase a mine or whatever, I’m speculatively pricing in some upside (e.g. a new use) which is part of my valuation for it, and if later a marginally more alert person buys me out because of a new actual use before I update my valuation, I fail to realise that value? But if no new actual use comes up, I’m left holding the bag? I agree. And possibly we also agree that’s the same issue as the umbrella, where someone noticed it’s raining before I did?
Wouldn’t the equilibrium here trend towards a bunch of wasted labor where I deliberately lowball the value of the land, and then if someone offers a larger amount, I just say no and then start paying the larger amount, thus having a potential to pay less tax but losing nothing if I’m called out for it? No downside to me personally, and if this became common, it’d be harder to legitimately buy stuff. Seems like you’d need to pay some sort of fee to the entity credibly offering this larger amount to make it worth it.
Hmm I don’t think so? If you buy land for $X, that’s the floor on what you could reasonably assess it at, which is basically the status quo world. So we’re in the status quo until someone comes along and bids up the price to their willingness-to-pay: Then, the asset either moves to someone who values it more, or you start paying higher taxes on it. I think either branch is preferable to the status quo?
Ideally you would want to allow depreciation though, which is a definite phenomenon! (Especially if things are neglected.)
Yeah, there’s some design questions. You’re right, the upside to the corrective bidders is naively nothing if they get called on it: they’re doing valuable corrective cybernetic labour for free.
Maybe a sensible refinement would be for them to be owed a small fee… or roughly equivalently some (temporary) direct share of the resulting increased Harberger tax.
Many versions of the proposal do not require you to sell immediately. Often there’s a built in delay period before the trade occurs.
But more generally, yeah, you don’t want to to do this with carabiners. But you might want to do it with land.
It seems like it would be pretty hard to define a single reasonable delay period for land sales. An example case where a large delay would be justifiable is: a business manufactures cars, and has a single factory that makes some critical component. The value of their business is effectively zero if they can’t manufacture that component. But it takes N years and D dollars to get zoning, environnemental, safety etc approvals for a new factory (and also to actually build it and get it running as smoothly as the last one, and hire competent staff, and lay off the old staff...). Having a variable “reasonable” delay and switching-cost compensation might work, but that sounds like a recipe for endless litigation.
On top of that, land can have network effects within a single owner—if a business builds 5 codependent factories and has to sell one of them, but cannot feasibly replace the one sold with something new nearby, each of the factories would have to be valued at the entire value of the network, multiplying your tax burden by the number of parcels your network is broken into.
I agree that the way we do land now is not good, but at first glance I don’t see a way to fix this proposed system without a bunch of patches with their own problems.
Leaving aside delays, this does get at a point I noticed wasn’t obviously addressed in that paper which is what to do about very seasonal things. The example I thought of (rather less macabre) was an umbrella in a rainstorm. I don’t think it’s sensibly applicable to most personal property.
Agreed, but the timing issues seem applicable to businesses’ property as well. Sudden unpredictable spikes in value (e.g. of a mine for a rare metal that somebody figured out a new use for) could result in a lot of churn and removes the upside (but not downside!) variance in asset value.
By this, do you mean something like: when I purchase a mine or whatever, I’m speculatively pricing in some upside (e.g. a new use) which is part of my valuation for it, and if later a marginally more alert person buys me out because of a new actual use before I update my valuation, I fail to realise that value? But if no new actual use comes up, I’m left holding the bag? I agree. And possibly we also agree that’s the same issue as the umbrella, where someone noticed it’s raining before I did?
A less crazed approach might be more like
if someone bids at or above your assessed value, you have to sell or start paying commensurably more tax (possibly backdated some amount)
Yup this makes more sense imo, basically having a right of refusal on the sale, but reflecting the now-assessed-higher tax rate
Wouldn’t the equilibrium here trend towards a bunch of wasted labor where I deliberately lowball the value of the land, and then if someone offers a larger amount, I just say no and then start paying the larger amount, thus having a potential to pay less tax but losing nothing if I’m called out for it? No downside to me personally, and if this became common, it’d be harder to legitimately buy stuff. Seems like you’d need to pay some sort of fee to the entity credibly offering this larger amount to make it worth it.
Hmm I don’t think so? If you buy land for $X, that’s the floor on what you could reasonably assess it at, which is basically the status quo world. So we’re in the status quo until someone comes along and bids up the price to their willingness-to-pay: Then, the asset either moves to someone who values it more, or you start paying higher taxes on it. I think either branch is preferable to the status quo?
Fair point, if you add that you can’t assess it at less than you paid for it, this problem goes away.
Ideally you would want to allow depreciation though, which is a definite phenomenon! (Especially if things are neglected.)
Yeah, there’s some design questions. You’re right, the upside to the corrective bidders is naively nothing if they get called on it: they’re doing valuable corrective cybernetic labour for free.
Maybe a sensible refinement would be for them to be owed a small fee… or roughly equivalently some (temporary) direct share of the resulting increased Harberger tax.
Yes, I think we agree here.