Land taxes are highly progressive.
Note that land taxes are only assessed on the value of the land, not the value of any buildings on the land. This incentivizes land owners to put the land to its highest and best use.
Doesn't it incentivize them to put land to the use that generates the most revenue? I don't see how that is necessarily the "best" use.
There will almost always be a way that a yard or garden could make more revenue, for example, such as by letting a bunch of advertisers put up billboards on it or letting someone use it for storage.
Is it really best to make it so that only the wealthy can afford to use land in a way that they enjoy rather than as an asset to be exploited for maximal revenue?
The main difference between property and land tax is that with a land tax, the structure isn't taxed. So you can build up "for free" wrt taxes, which encourages more density on the most valuable land.
E.g. land in the middle of downtown San Francisco that's currently rented out as a flat parking lot, could instead be built up into multi level parking or housing instead. Whereas the current tax structure would punish such developments by increasing the tax (which is why it's still a flat parking lot).
Contrast that with New Orleans after Hurricane Katrina. Property owners had their buildings destroyed, so taxes went to zero (taxes based on the property value, not the land value). This incentivized property owners to wait and see if their neighbors would rebuild rather than take immediate action.
Property taxes on land aren't unique to San Francisco. It's basically standard practice in most cities to have one tax for property and one tax for improvements.
> Contrast that with New Orleans after Hurricane Katrina. Property owners had their buildings destroyed, so taxes went to zero (taxes based on the property value, not the land value)
New Orleans has separate property taxes on land and structures, so property taxes did not go to $0 after Katrina.
Overall property tax rates went up because income from taxes on structures went down, but unimproved lots still get a tax bill.
Maybe in the 19th century, where this idea originated. Economics of business have changed too significantly to use it as a one size fits all taxation scheme.
It may have made sense when revenue was somewhat proportional to the amount of land a business occupied, but that no longer holds true in the age of skyscrapers and digital revenue generation.
An internet company in a 10-story building would love this scheme, though, because they could generate billions in revenue but be taxed at the same rate as a local neighborhood of people who owned their homes for a few decades.
Land-only taxes may have been an interesting idea in the 19th century, but they aren’t relevant to a modern economy.
That's irrelevant, because the ultimate owners of the corporation - the shareholders - will always be in demand of land. Real estate explains most of the growth in wealth inequality in the US over the last 60 years:
https://medium.com/the-ferenstein-wire/a-26-year-old-mit-gra...
For example, if fewer wealthy individuals bought sprawling estates, and more bought high-rise apartments, we'd see more production of the latter, which would increase housing concentrations in high-productivity urban areas, and in doing so, apply downward pressure on rental rates in areas which offer the most economic opportunities.
This is basically saying real estate isn't relevant to a modern economy for tax policy. Broadly true in 19th century United Kingdom in the midst of the Industrial Revolution [1]. Disputed by many millionaires today in the US [2]. Another way to track the relative weighting of land in wealthy portfolios is by aggregate measures.
The wealth of the US 1% grew 2.22X from 2005-2020 [3]. During the same period, the value of land held by the US 1% grew from $3,176,274 million to $4,607,729 million, 1.45X [4]. Not a proportional tracking of wealth increase, but I wouldn't call it "not relevant"; this is hardly rounding error territory where I would dismiss it for tax policy purposes. The sample period is also during an ahistorical secular trend when held across decades when securities were and are quite strong compared to real estate assets, so I don't know what a broader and more granular analysis would reveal, but my cursory glance across a one-generation span would make me hesitate to strongly take the "aren't relevant to a modern economy" position with our current set of policies.
The global urban real estate market so severely punishing younger generations for so long with such high prices relative to income and income precarity indicates some severe secular rent-seeking / gatekeeping taking place at an ahistorically wide scale, scope and duration. I have no dog in that hunt; I was purely lucky by timing to not live in that cohort, but I share their hostility to the status quo. If you favor the "modern economy making real estate not relevant" position, then tax, monetary, finance, social and industrial policies like LVT (though LVT is not without its challenges [5] [6]) that disincentivize such rent-seeking and favor a more efficient allocation of limited capital away from real estate towards such modern industries would be welcome, to the point that aggregate measures show little to no correlation between wealth concentration and real estate instead of our current situation.
I'm personally in favor of more metropolitan transit authorities consciously and deliberately using public transportation corridors as part and parcel of an explicit industrial policy that drives down residential costs over time. Residential development is planned more along Singaporean public housing lines with a goal of ever-decreasing DTI ratios (possible with more modern construction techniques like Lstiburek'ean Perfect Walls and Passive Net Zero in structures that last centuries, and co-operative financial organizational structures), than open market operations in the US. This doesn't have to come at the expense of open market operations; they're free to syndicate their own transit networks and monetize those networks. I'm advocating the free market advocates in US real estate becoming even stronger in the global market by practicing true free markets instead of relying upon the crutches of publicly-funded infrastructure to break the capital ground in front of them.
[1] https://www.hbs.edu/ris/Publication%20Files/Land_e202c898-eb...
[2] https://www.cnbc.com/2019/10/01/real-estate-is-still-the-bes...
[3] https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...
[4] https://fred.stlouisfed.org/series/WFRBLT01002
[5] https://www.lincolninst.edu/publications/articles/land-value...
[6] https://www.lincolninst.edu/sites/default/files/pubfiles/ass...
What’s the value of the land that Google uses?
I say the land value tax (LVT) is best grouped with Pigouvian taxes; as PP says, normal property tax relatively incentivizes holding undeveloped land, which is like charging a higher carbon tax if your car has a better MPG.
One one hand, we can also do a VAT in developed countries --- perhaps more feasible than in the 19th century and making more sense if we are no longer rapidly developing and reliant on private investment to foster those changes --- on the other hand in big closed economies we can also just print money quite safely, so Henry George is quite right to focus Pigouvian taxes when "taxation for the revenue" is far less important than curbing bad material outcomes.
(I only suggest VAT with a UBI to make it no longer regressive.)
Land value taxes adjust based on how desirable a plot is: basically, you get to keep any value you generate above and beyond the value the society surrounding the land gave it. If you leave a plot of land empty in downtown, you’re preventing someone else from using that plot productively, and adding a net negative cost to the surrounding properties. So you should be taxed accordingly.
If you keep the zoning then maybe the land isn’t worth that much, but if property taxes were based on the “true” land value then it would mean farmers sell out faster to create sprawl.
I would rip up urban zoning with an LVT to ensure density, but keep the agricultural zoning because we can't eat skyscrapers.
Not especially. The skyscraper land is probably 10000x more valuable per square foot so the tax will be 100x higher.
If you assume every square foot is taxed the same then you've kind of missed the point of a land value tax.
It won't fix the inherent problems with intellectual property though.
This would also help push back against ridiculous patents and eternal copyright.
Eternal copyright, however - yes, sucks.
If you have a good idea and patent it, then taxation of that patent right would force you to license it or lose your monopoly protection granted by the government.
If you have a good expression of an idea and copyright it, then taxation of that copyright would force you to license it or lose your monopoly protection granted by the government.
Either way, you are still granted the IPRs, on a "pay for it" basis that captures some of that value back.
That may have made sense in the 19th century when agriculture dominated the economy, but it’s irrelevant today.
At scale it becomes a tax on how space-inefficient your business is. Bad news for farmers, great news for the business running a 1000-person operation out of a skyscraper. You could of course start trying to change taxation rates based on various factors to compensate, but those factors reduce to proxies for revenue, which puts us back to square one.
19th venture taxation theories don’t translate to modern multinational trade with digital commerce.