Land Value Tax
A land value tax is a tax on the value of land. Under this tax, the owner of a parcel of land must pay a percentage of the total value of the land each year. Note that the value of the use of the land is not taxed. This means if you own a house, improvements to the house do not increase the land value tax. Similarly, if you own a business, the productivity of your business does not directly affect the value of your land (but if you own land in an area with lots of successful businesses, the value of your land will be higher).
It is a tenant of Georgism, an economic ideology that stipulates individuals ought to own the value they produce for themselves, while economic rent derived from land – including from all natural resources, the commons, and urban locations – should belong equally to all members of society. Named for American economist and social reformer Henry George.
Benefits
It has the following benefits:
Encourages productive use of land and discourages land speculation
Owning land and doing nothing with it is a bad idea with a land value tax – you ought to use the land you own to generate money in order to pay the LVT.
Attaching rent to land value encourages lower rent
If rent is factored into the appraisal of the land value, then when a landlord raises rent they will see a corresponding rise in LVT. LVT implemented in this way therefore encourages lower rent.
Encourages more houses per lot
Builders are encouraged to build terraces/duplexes on parcels rather than single family homes, since this provides more productivity for the same value of land. Leads to more productive neighborhoods/suburbs, stronger local businesses, etc.
Lower rent lowers consumer goods
Cost of coffee largely dependent on the rent of the building. Lower rent caused by LVT leads to lower cost of consumer goods.
Can’t avoid LVT
You can avoid income tax by officially making $1 (Steve Jobs) or corporation tax by registering your business in the Cayman Islands, you can’t avoid LVT. How do you move the land out of the country? It is the country. Hence it is far harder for the rich to avoid LVT.
Citizen’s dividend
Anything left after paying for schools, military, roads, etc. Gets redistributed equally to all citizens. This disproportionately impacts the poor.
Everyone Likes LVT
Mitlon Friedman, economist Joseph Stiglitz (social democrat), Adam Smith, Thomas Jefferson, Bertram Russel, Benjaman Franklin, etc. all like LVT. Is a unifying idea.
If a liberal: you like Georgism because it increases the productivity of land and lowers the cost of living.
If you’re on the left: it lessens the wealth of the bourgeoisie while redistributed wealth to the poorest.
If you’re libertarian: it lowers the rest of the taxes collected by the government and lessens government involvement.
The poorest in society get the best deal.
Instances of Georgism in the real world
Alaska has a LVT. So does Singapore. The former is a large place with vast natural resources, the latter a small island where space is at a premium.