A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements.[1] It is also known as a location value tax, a point valuation tax, a site valuation tax, split rate tax, or a site-value rating.
Land value taxes are generally favored by economists as they do not cause economic inefficiency, and reduce inequality.[2] A land value tax is a progressive tax, in that the tax burden falls on land owners, because land ownership is correlated with wealth and income.[3][4] The land value tax has been referred to as “the perfect tax” and the economic efficiency of a land value tax has been accepted since the eighteenth century.[1][5][6]
LVT’s efficiency has been observed in practice.[18] Fred Foldvary stated that LVT discourages speculative land holding because the tax reflects changes in land value (up and down), encouraging landowners to develop or sell vacant/underused plots in high demand. Foldvary claimed that LVT increases investment in dilapidated inner city areas because improvements don’t cause tax increases. This in turn reduces the incentive to build on remote sites and so reduces urban sprawl.[19] For example, Harrisburg, Pennsylvania’s LVT has operated since 1975. This policy was credited by mayor Stephen R. Reed with reducing the number of vacant downtown structures from around 4,200 in 1982 to fewer than 500.[20]
LVT is arguably an ecotax because it discourages the waste of prime locations, which are a finite resource.[21][22][23] Many urban planners claim that LVT is an effective method to promote transit-oriented development.[24][25]
It reveals that much of the anticipated future tax obligations appear to have been already capitalised into lower land prices. Additionally, the tax transition may have also deterred speculative buyers from the housing market, adding even further to the recent pattern of low and stable property prices in the Territory. Because of the price effect of the land tax, a typical new home buyer in the Territory will save between $1,000 and $2,200 per year on mortgage repayments.
That’s actually the beauty of LVT – the government already knows who owns what land (the landowner has the deed), and land can’t be hidden or offshored. You may try having shell companies, but the tax bill comes due regardless. The reason shell companies work for avoiding other taxes is because they can allow you to offshore your on-paper profits to tax havens. LVT doesn’t tax you on profits, so it doesn’t matter where the profits are on paper. Similar for income or sales taxes, income and sales can be done cash-only and hidden.
Off the top of my head I’m imagining the infinite loan scheme, but modified a bit, where the vast bulk of your wealth is in securities and then you “rent” a property from a company for like $1 a year. The company doesn’t pay its taxes, it goes bankrupt, a new company is created, and the process starts again. YOU never owe taxes, the COMPANY owes taxes and could get deductions on any number of bogus things and then worst case just declare bankruptcy and fold.
This could be addressed, but it’s similar to people saying Mac or Linux is immune to viruses. If they get popular enough, they’ll need antivirus software.
Similarly, no tax scheme is immune to loopholes, but as long as they’re addressed, it’s not a point against it.
You’re correct that you could have a loophole through that method, but property taxes also have that method. I think the most logical solution would be for the city to be able to repossess the land if the taxes have not been paid on it in, say, 2 years, regardless of ownership. Gives one year of leniency in case of genuine liquidity issues, but avoids being able to skirt the law with corporate bankruptcies.
But, of course, if you write an LVT law with exemptions, deductions, special cases, etc., you make it very prone to evasion like any tax system with those does. At the end of the day, it does definitely come down to implementation.
Yeah nope. You have to understand the reason deductions exists for income tax is that they allow you to deduct your costs from the revenue you take in and are only paying tax on the profit.
Edit: I should add plenty of places that do have land taxes usually have a lot of exemptions like here, your primary residence is exempted as well as any land for primary production (land used for agriculture) but those exist for political reasons.
It really depends on where the land is as it’s based on value. If you are talking about replacing property taxes with land value taxes typically it’s just a rate on the value but in this case it’s just the land value so a higher rate but only applies to land. If you could figure out the total land value in your neighbourhood you could figure it out.
As for who is affected, single family homes on the outskirts probably see a drop in taxes while those in the inner city and vacant plots see a large increase.
The people who will be impacted first will be people who own vacant lots and parking lots in and around downtowns. If you’re concerned about people getting booted out of their homes, consider Estonia:
Estonia levies an LVT to fund municipalities. It is a state level tax, but 100% of the revenue funds Local Councils. The rate is set by the Local Council within the limits of 0.1–2.5%. It is one of the most important sources of funding for municipalities.[90] LVT is levied on the value of the land only. Few exemptions are available and even public institutions are subject to it. Church sites are exempt, but other land held by religious institutions is not.[90] The tax has contributed to a high rate (~90%)[90] of owner-occupied residences within Estonia, compared to a rate of 67.4% in the United States.[91]
In general, LVT should increase overall housing supply, improve affordability, and can be used to reduce other taxes such as property, income, and sales taxes. Most serious proposals I have seen have been to replace property taxes with LVT. These factors should make it easier on average households generally, and also allow them more flexibility to downsize (once your kids have moved out, do you really need a jumbo house all to yourself?), rather than locking you into the only place you can afford.
That was one concern. Another is our specific situation. Our foundation square footage is 972, our lot is 3,991 in total, none of it yard, half is all wild growth and weed trees, the rest is clover we planted to replace the grass and support pollinators. Our property tax is $3,750 this year, our land value is $46,400. I understand the calculation would be different on LVT but if I’d end up paying more on an LVT scheme then I wouldn’t want to have it in place.
I’d be more in favor if the county determined it’s annual budget costs and then divided that by the total acreage of privately owned land and you paid the percentage equal to your total land value.
I may be misunderstanding but it reads like .09 acres I have may be assessed as more valuable because of where it is than .09 acres 20 miles away in Tre same state and county.
You might live in a place which already has some form of land value tax. Although a key distinction is that LVT is a tax on just the value of the land, not the value of the entire property that includes buildings, landscaping, ect. …
At least give some kind of mention to Henry George for being the magnificent bastard that came up with this. His history is fascinating and most people don’t know who he is because he pissed off all the major landowners (ivy league colleges) who blackballed even mention of his name.
A fellow georgist, I see! But yeah, the legacy section on his wikipedia page is absolutely insane, and yet I had never even heard of him before about 2 years ago (which of course led to me promptly becoming georgist). Not a whole lot of people learn about the guy and about georgism without swiftly becoming a georgist themselves lol.
![[meme] How would you rather see this land developed?](https://lemmy.world/pictrs/image/f6ec67a5-2636-4875-8dd4-fa5241a3083c.jpeg){kind=link}
Funny you say that as I’m the creator and mod of [email protected]
For others curious about land value taxes:
Further, it can’t be passed on to tenants, both in economic theory and in observed practice, and even a milquetoast LVT – such as in the Australian Capital Territory – can have positive impacts:
Sounds like it could have a lot of loopholes like any tax scheme but as long as those are addressed, this looks like a reasonable proposal.
That’s actually the beauty of LVT – the government already knows who owns what land (the landowner has the deed), and land can’t be hidden or offshored. You may try having shell companies, but the tax bill comes due regardless. The reason shell companies work for avoiding other taxes is because they can allow you to offshore your on-paper profits to tax havens. LVT doesn’t tax you on profits, so it doesn’t matter where the profits are on paper. Similar for income or sales taxes, income and sales can be done cash-only and hidden.
Off the top of my head I’m imagining the infinite loan scheme, but modified a bit, where the vast bulk of your wealth is in securities and then you “rent” a property from a company for like $1 a year. The company doesn’t pay its taxes, it goes bankrupt, a new company is created, and the process starts again. YOU never owe taxes, the COMPANY owes taxes and could get deductions on any number of bogus things and then worst case just declare bankruptcy and fold.
This could be addressed, but it’s similar to people saying Mac or Linux is immune to viruses. If they get popular enough, they’ll need antivirus software.
Similarly, no tax scheme is immune to loopholes, but as long as they’re addressed, it’s not a point against it.
You’re correct that you could have a loophole through that method, but property taxes also have that method. I think the most logical solution would be for the city to be able to repossess the land if the taxes have not been paid on it in, say, 2 years, regardless of ownership. Gives one year of leniency in case of genuine liquidity issues, but avoids being able to skirt the law with corporate bankruptcies.
But, of course, if you write an LVT law with exemptions, deductions, special cases, etc., you make it very prone to evasion like any tax system with those does. At the end of the day, it does definitely come down to implementation.
I think you are implying there’s deductions against land value tax but there typically isn’t.
Even for businesses?
Yeah nope. You have to understand the reason deductions exists for income tax is that they allow you to deduct your costs from the revenue you take in and are only paying tax on the profit.
Edit: I should add plenty of places that do have land taxes usually have a lot of exemptions like here, your primary residence is exempted as well as any land for primary production (land used for agriculture) but those exist for political reasons.
Interesting, that makes sense.
To somebody else’s point, how would this compare to the what single family home owners pay now?
Where I live we have about .09 acres of land our house sits on and we pay ~$3000/year.
It really depends on where the land is as it’s based on value. If you are talking about replacing property taxes with land value taxes typically it’s just a rate on the value but in this case it’s just the land value so a higher rate but only applies to land. If you could figure out the total land value in your neighbourhood you could figure it out.
As for who is affected, single family homes on the outskirts probably see a drop in taxes while those in the inner city and vacant plots see a large increase.
So it disincentivizes living in an urban setting an penalized fixed income people already in those homes?
Not necessarily the first as long as it’s done in land efficient way and the second if they are unwilling to move but otherwise yes.
Oh boy! I guess I see why people are against it. Probably should come up with a better plan.
Yeah you aren’t wrong there. Figuring our a way to placated those groups is required to get it to be implemented.
The people who will be impacted first will be people who own vacant lots and parking lots in and around downtowns. If you’re concerned about people getting booted out of their homes, consider Estonia:
https://en.m.wikipedia.org/wiki/Land_value_tax
In general, LVT should increase overall housing supply, improve affordability, and can be used to reduce other taxes such as property, income, and sales taxes. Most serious proposals I have seen have been to replace property taxes with LVT. These factors should make it easier on average households generally, and also allow them more flexibility to downsize (once your kids have moved out, do you really need a jumbo house all to yourself?), rather than locking you into the only place you can afford.
That was one concern. Another is our specific situation. Our foundation square footage is 972, our lot is 3,991 in total, none of it yard, half is all wild growth and weed trees, the rest is clover we planted to replace the grass and support pollinators. Our property tax is $3,750 this year, our land value is $46,400. I understand the calculation would be different on LVT but if I’d end up paying more on an LVT scheme then I wouldn’t want to have it in place.
I’d be more in favor if the county determined it’s annual budget costs and then divided that by the total acreage of privately owned land and you paid the percentage equal to your total land value.
I may be misunderstanding but it reads like .09 acres I have may be assessed as more valuable because of where it is than .09 acres 20 miles away in Tre same state and county.
You might live in a place which already has some form of land value tax. Although a key distinction is that LVT is a tax on just the value of the land, not the value of the entire property that includes buildings, landscaping, ect. …
At least give some kind of mention to Henry George for being the magnificent bastard that came up with this. His history is fascinating and most people don’t know who he is because he pissed off all the major landowners (ivy league colleges) who blackballed even mention of his name.
A fellow georgist, I see! But yeah, the legacy section on his wikipedia page is absolutely insane, and yet I had never even heard of him before about 2 years ago (which of course led to me promptly becoming georgist). Not a whole lot of people learn about the guy and about georgism without swiftly becoming a georgist themselves lol.