Meet the Greatest Tax in the World  

A blog about business and economics.
Jan. 23 2014 1:58 PM

Land Value Tax Won't Fix San Francisco

Nice view. Shame if someone spoiled it with some buildings.

Photo by Ezra Shaw/Getty Images

I love the idea of a land value tax. Instead of taxing human labor (and disincentivizing work) or taxing accumulated capital (and disincentivizing savings) you tax land. You get revenue (good!) in a progressive way (because landowners are rich!) without any bad incentives (amazing!) and everyone's happy. Noah Smith thinks it could greatly ameliorate the class tensions currently gripping San Francisco.

Here I'm afraid that I'm skeptical. There are lots of places in the United States of America—most places, even—where a tax on land value would be a great thing for housing affordability. For example, if Harris County in Texas replaced its property tax with a land value tax it would alter the incentives facing property owners in the Houston area. You'd get more building, less idle land, more housing supply, and lower rents. But in a place like San Francisco (or Cambridge, Mass.; or Manhattan; or Santa Monica, Calif.; or D.C.), the constraint on the supply of new buildings isn't really taxes it's zoning. The median value of an owner-occupied house in San Francisco is $750,900—almost double the California average and more than quadruple the national average. Under the circumstances, the financial incentives to build new housing units are already extremely strong. The problem is that it's hard to get regulatory permission to build.

Now there are two ways you can think about the intersection of restrictive zoning and tax policy.


One is to simply take the restrictive zoning as an unchangeable given. In that case, urban buildings are actually a lot like land. The supply of buildings is essentially unresponsive to a change in financial incentives. Under the circumstances even really high taxes on buildings won't lead to less building, so you might as well jack them up. More conventionally, you can place a high implicit tax on rental property by imposing stringent rent control regulations. The downside of rent control is that it destroys incentives to increase the housing supply and leads to scarcity. But if your zoning code has already destroyed those incentives then why not?

The other is to reject the notion that restrictive zoning is unchangeable. If a city wanted to have robust population growth, affordable housing, and lots of construction sector job opportunities then it could easily change its zoning code to allow for more housing. Having upzoned for density, prosperity, and environmental sustainability, it would find itself in a situation where a land value tax is much smarter than a traditional property tax. But for the already-built-up, already-expensive, restrictively-zoned cities of America you need to fix your zoning first.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


Frame Game

Hard Knocks

I was hit by a teacher in an East Texas public school. It taught me nothing.

Yes, Black Families Tend to Spank More. That Doesn’t Mean It’s Good for Black Kids.

Why Greenland’s “Dark Snow” Should Worry You

If You’re Outraged by the NFL, Follow This Satirical Blowhard on Twitter

The Best Way to Organize Your Fridge


The GOP’s Focus on Fake Problems

Why candidates like Scott Walker are building campaigns on drug tests for the poor and voter ID laws.

Sports Nut

Giving Up on Goodell

How the NFL lost the trust of its most loyal reporters.

Iran and the U.S. Are Allies Against ISIS but Aren’t Ready to Admit It Yet

Farewell! Emily Bazelon on What She Will Miss About Slate.

  News & Politics
Sept. 16 2014 4:08 PM More Than Scottish Pride Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 
Sept. 16 2014 4:16 PM The iPhone 6 Marks a Fresh Chance for Wireless Carriers to Kill Your Unlimited Data
The Eye
Sept. 16 2014 12:20 PM These Outdoor Cat Shelters Have More Style Than the Average Home
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Slate Plus Video
Sept. 16 2014 2:06 PM A Farewell From Emily Bazelon The former senior editor talks about her very first Slate pitch and says goodbye to the magazine.
Brow Beat
Sept. 16 2014 5:07 PM One Comedy Group Has the Perfect Idea for Ken Burns’ Next Project
Future Tense
Sept. 16 2014 1:48 PM Why We Need a Federal Robotics Commission
  Health & Science
Sept. 16 2014 4:09 PM It’s All Connected What links creativity, conspiracy theories, and delusions? A phenomenon called apophenia.
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.