It seems like you overlooked the obvious -- when your LVT went up, your land went up in value. You sold your land and moved to some other, cheaper, place and thus realized a profit from that increase in value. If, in the other place, you make things better and the land goes up in value so much that you can no longer afford the LVT, then you can sell your land and realize, again, a significant profit. These profits are a strong incentive.
Totally, the ability to move is definitely present. The incentive to move if one chooses is a great benefit of increasing land value, we're absolutely agreed on that front.
The problem that I'm trying to point out is the converse disincentive to stay which these policies can introduce. For instance, my family, friends, social and professional networks, and history are all within the region I currently live. If I'm priced out of this current region but am okay with moving to a different region, then this is a great situation: everyone's happy.
If, on the other hand, I want to keep living the life I've built over decades, the ability to cut-and-run with the increase in my property value is little consolation; I'll be a richer man, but I'll be forced away from my home.
I've mentioned it a few times in the thread, but just want to clarify: I'm not saying that from a policy perspective we shouldn't force these people to move in order to accommodate the needs of more people. All I'm saying is that we are giving those people who want to stay in their homes the short end of the stick with these policies.
If we look at towns and cities with super-restrictive policies (e.g. single-family zoning, locked in property tax bills, rent control, etc.), they are objectively inefficient in how they allocate land. Being a resident in one of these places, though, would lead to a pretty good and stable life.
To the residents of these locations, heavy land and property tax policies are essentially telling them "Other, richer people want to live here but it's too full, so you should find somewhere else to live". It's not hard to imagine the human aspect of the opposition (including restrictive zoning in the status quo), which conversely say "Other, richer people want to live here but it's too full, so they should find somewhere else to live.".
Again, inefficient in the aggregate, and I wouldn't argue that it's the foundation we should build policy on, but it's hard to blame someone for taking that stance.
The point is not to force people to move, the point is to cover the state's revenue by land tax instead of income tax or sales tax.
The average Californian (could not find median) pays about 6945 USD to the state in income tax (using 106916 USD as the income figure). The median California home was about 650000 USD in 2020; it is projected to be 800000 USD in 2022. Assuming an LVT of 1% (the actual property tax rate is somewhat lower in California), the taxes would be 6500 USD in 2020 or 8000 USD in 2022. These are of the same order as the income tax they would replace.
This is remarkable, given that we are considering an LVT in the context of a badly overheated housing market -- the situation an LVT is designed to prevent.
In California, there is not only high income tax but high sales tax, capital gains tax, and many other miscellaneous costs. If the government is too expensive, it's too expensive; you may be forced to move because of that, but it's not because of a particular tax strategy. Any tax strategy can be used to charge you too much money. This is one of many reasons that a dysfunctional property tax regime does not support a good and stable life.
So what about capital gains/income tax? AIUI - and I have not really studied LVT's closely, but since they have been bandied about quite a bit, I know only enough to be dangerous - LVT's are supposed to pretty much eliminate other taxes, correct? If your property doubles in value, and you sell to get out from under the tax, but you lose 25-40% of that increase to income tax, you just took a big hit.
I don't think you're representing the situation fairly, because profiting 60% to 75% is definitely not a loss -- it's not taking a "big hit" -- and the problem there has nothing to do with LVTs, anyways.
If your property doubles in value in and you sell it and pay 25% to 40% of the increase:
the gross profit is: 200 - 100 = 100
the tax is: 25% to 40% of 100 which is 25 to 40
the profit post tax is: 100 minus 25 to 40 or, in other words, 75 to 60
It's a big hit, not a complete erasure of profit (setting aside simple inflation, because that's a big elephant in the room here). When you rewrite the tax laws so that I can effectively be forced to sell because other people would make more productive use of my land, well, regardless of how I feel about the idea, that's a reasonable argument.
But if you tax me for the increase in the value of my land while I still own it, and then tax me on the profit I made from selling it when I decided I didn't want to pay those taxes anymore, that just seems like double-dipping. Isn't the whole point of the LVT that it makes buy-and-hold speculation unprofitable via the LVT itself? So if someone pays their LVT until it becomes so high that the expense of moving is less than the expense of saving, haven't they already effectively paid for their share of the increased value?
I think LVT's are interesting, but the practical considerations involved are enormous.
There are several problems with your line of argument here. The biggest one is that you don't pay capital gains tax on the sale of your primary home.
Some other problems with your thinking:
* Property tax is, in general, much lower than capital gains.
* Taxes paid to a state can not cover your federal tax bill (the lion's share of capital gains taxes are federal). In other words, it's not the same "you" in all cases listed above.
