> The land value tax can’t be dodged by leaving nor can it be passed on to renters.
In what sense can't it be passed to renters? Esp if all landlords in the market were faced with a new land tax that they had not previously planned for, why would it not be passed on?
Rent is a function of supply and demand, not a landlord's costs, otherwise we would expect changes in e.g. mortgage interest costs to be passed on to, but in practice we don't see this effect. We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
Competition is not one thing. For a producer of widgets, competition means that there is immense instantaneous leverage if you can reduce the price, because buyers will switch to you, increasing your market share until your competitor can match - if they can.
A landlord is usually in a different position. If their personal costs drop (eg, they paid off their mortgage) but the market price stays the same, how do they benefit by reducing the price they offer? Only by reducing the time it takes to rent out, which isn't a significant factor in exactly case when tenants would most like rents to go down - when prices are high because of demand.
The details of these mechanisms matter. Market can be out of equilibrium for a long time; maybe indefinitely.
abeppu · · focus · HN ↗
In what sense can't it be passed to renters? Esp if all landlords in the market were faced with a new land tax that they had not previously planned for, why would it not be passed on?
larsiusprime · · focus · HN ↗
Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
WalterBright · · focus · HN ↗
Of course it does. The landlord's costs factor into the supply made available by landlords.
> When landlords' costs drop, do they drop the rent in response?
Competition says they do.
ajb · · focus · HN ↗
A landlord is usually in a different position. If their personal costs drop (eg, they paid off their mortgage) but the market price stays the same, how do they benefit by reducing the price they offer? Only by reducing the time it takes to rent out, which isn't a significant factor in exactly case when tenants would most like rents to go down - when prices are high because of demand.
The details of these mechanisms matter. Market can be out of equilibrium for a long time; maybe indefinitely.
WalterBright · · focus · HN ↗
Arbitrage forces say otherwise.
ajb · · focus · HN ↗