Value capture makes infrastructure (and COVID funding) self-financing

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Frank de Jong

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Nov 27, 2020, 8:15:56 AM11/27/20
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Infrastructure can be self-financing through value capture -- government funding not required, governments don't need to print money to build infrastructure. Check out the below new example in Oz. 

Similarly, instead of QE to finance COVID funding, national governments could use value capture. Economic rent capture would drain the real estate liquidity swamps. Frank
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Jassal Devpreet

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Nov 27, 2020, 11:58:51 AM11/27/20
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Hi Frank,

Nice article......we still need to find a means to capture the funds.....coinage, monetary policy......

It's time to write one.

Devpreet Jassal

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Polito

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Nov 28, 2020, 5:21:14 PM11/28/20
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Frank, maybe I am the only one who needs it, but could you briefly explain the differences between this tax, and site-value taxes and Tax Increment Financing  as explained in this paper
You probably know Enid Slack. She says 
Next comes a consideration of four financing tools less commonly used in Canada:
site-value taxes, land-value capture taxes, tax increment financing districts, and
municipal fuel taxes. ... 
By increasing holding costs and discouraging speculation,
site-value taxation places pressure on owners of undeveloped property to put their
land to a more profitable use.
In principle, a site-value regime taxes the location rents (the returns from a
particular location regardless of the improvements to the site). If we assume land is
in fixed supply (the supply of land offered for development is unresponsive to price
changes), the tax falls on landowners and cannot be shifted to others. Increased
site-value taxes are capitalized into lower property values. If the land is already in
its most profitable use, the site-value tax is neutral with respect to the landowner’s
decisions: no possible use of the land can reduce the tax. A move from a property
tax (which discourages investment in building and improvements) to a site-value
tax (which is neutral) leads to increased investment.

Thanks

Joe Polito






On Fri, Nov 27, 2020 at 8:15 AM Frank de Jong <fde...@earthsharing.ca> wrote:
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Frank de Jong

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Nov 30, 2020, 9:46:58 AM11/30/20
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Joe, yea, nice to see the CD Howe institute talking about Henry George. 

Site value taxation, land value taxation and land value capture are the same thing, just different names for collecting the rental value of land for public purposes. Value Capture is a silo tax for specific infrastructure projects, but it's the same mechanism.Tax Increment Financing is a bad idea, punishing developed areas in favour of redeveloping other areas. It's a subsidy for developers which wouldn't be needed if LVT were in place across a municipality.

Enid Slack gets it half correct and half backwards. Below are her 3 criticisms which are all diametrically wrong, amazingly. How can a smart person be so dumb. She's what George would call a muddlehead. LVT intensifies development everywhere equally, it doesn't bias against downtown!! LVT preserves farmland, nature and open spaces everywhere by reducing sprawl everywhere, not the opposite!!! Assessing land value is not at all difficult!! Good grief.  Frank

"On the other hand, a site-value tax greatly increases the difficulty of preserving open space and farmland on the urban fringe because, other things being equal, it speeds up development there. To preserve farmland and open space under a regime of site-value taxes, a municipality must enforce other planning regulations.28 Another issue arises from a move from a property tax system to a site-value system. The move shifts taxes from properties in suburban areas, where land values are lower, to properties in the downtown area, where land values are higher. This shift can discourage investment in downtown cores. One final problem with site-value taxation has to do with its implementation. Accurate land valuation challenges assessors because urban real estate sales combine the value of land and improvements. Separating the two can be difficult. "


Polito

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Nov 30, 2020, 1:34:50 PM11/30/20
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Thanks for such a detailed answer.  And thanks for mentoring us all....  Though I feel monetary reform is the greatest priority - as proven by the Covid Crisis, I think land value tax tools are extremely important, and your observations have contributed greatly to my conversion!
    It is interesting how within a movement there can be splintering, and even when using the same terminology, there can be small but important differences, often leading to slightly different nomenclature as seen in the articles.

I found the Slack article looking at a recent paper by Dachis. I will send you my reactions to it.... but after my first scan and the other readings below, I have a better understanding of your past observations.
My own view is that if implemented land value tax as needed  - baby steps :) -, and reduced as needed the capital gains tax benefit on land sales and property flipping, the property speculation would go down, the bank financing of property would go down, the price of land would go down, and housing would be more profitable and more plentiful. ... I say as needed, because one sudden implementation could cause a considerable fall in prices which would be very hard on people who stretched themselves to the limit to buy homes. Many would be underwater. A modest decrease would be tolerated, and a long trend of more affordable housing would ensue. But if it did not, we could ratchet up the two approaches until we get the desired effect. 

 This is the Dachis paper

then I scanned his book which was very friendly to land-value capture


Frank de Jong

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Nov 30, 2020, 2:22:59 PM11/30/20
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You're correct, Joe, a sudden switch will never happen, too seismic. Here's a proposal to make it voluntary and one at a time.

Location Value Covenants






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