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Land value tax

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A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements upon it.[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.

Some economists favor LVT, arguing it does not cause economic inefficiency, and helps reduce economic 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] Economists since Adam Smith and David Ricardo have advocated this tax because it does not hurt economic activity, and encourages development without subsidies.

LVT is associated with Henry George, whose ideology became known as Georgism. George argued that taxing the land value is the most logical source of public revenue because the supply of land is fixed and because public infrastructure improvements would be reflected in (and thus paid for by) increased land values.[7]

A low-rate land value tax is currently implemented throughout Denmark,[8] Estonia, Lithuania,[9] Russia,[10] Singapore,[11] and Taiwan;[12] it has also been applied to lesser extents in parts of Australia, Germany, Mexico (Mexicali), and the United States (e.g., Pennsylvania[13]).

  1. ^ a b Webb, Merryn (27 September 2013). "How a levy based on location values could be the perfect tax". Financial Times. Archived from the original on 10 December 2022. Retrieved 4 April 2020.
  2. ^ Joseph, Stiglitz (2015). "The Origins of Inequality, And Policies to Contain It" (PDF). National Tax Journal. June 2015, 68 (2): 425–448.
  3. ^ Possible reforms of real estate taxation: criteria for successful policies. Brussels: European Commission, Directorate-General for Economic and Financial Affairs. 2012. ISBN 978-92-79-22920-6.
  4. ^ Binswanger-Mkhize, Hans P; Bourguignon, Camille; Brink, Rogier van den (2009). Binswanger-Mkhize, Hans P.; Bourguignon, Camille; Van Den Brink, Rogier (eds.). Agricultural Land Redistribution: Toward Greater Consensus. World Bank. doi:10.1596/978-0-8213-7627-0. ISBN 978-0-8213-7627-0. A land tax is considered a progressive tax in that wealthy landowners normally should be paying relatively more than poorer landowners and tenants. Conversely, a tax on buildings can be said to be regressive, falling heavily on tenants who generally are poorer than the landlords
  5. ^ "Why land value taxes are so popular, yet so rare". The Economist. 10 November 2014. Yet in the discussion over property taxes a favourite proposal of economists—a tax on the unimproved value of land—has been absent from the debate. Throughout history, economists have advocated such a tax. Adam Smith said "nothing [could] be more reasonable". Milton Friedman said it was "least bad tax". Yet there are only a handful of real-world examples of land value taxes (LVT). Why are they so popular yet so rare?
  6. ^ Smith, Adam (1776). The Wealth of Nations, Book V, Chapter 2, Article I: Taxes upon the Rent of Houses. Ground-rents are a still more proper subject of taxation than the rent of houses. A tax upon ground-rents would not raise the rents of houses. It would fall altogether upon the owner of the ground-rent, who acts always as a monopolist, and exacts the greatest rent which can be got for the use of his ground.
  7. ^ George, Henry (1879). Progress and Poverty. The often cited passage is titled "The unbound Savannah."
  8. ^ Kristensen, K.J. "Land Valuation in Denmark (1903–1945)". www.grundskyld.dk. Archived from the original on 16 April 2018. Retrieved 3 April 2018.
  9. ^ Zelmenis, Artis. "Taxes in Lithuania: Baltic Legal taxation". www.baltic-legal.com. Retrieved 3 April 2018.
  10. ^ "Federal Tax Service of Russia: Land Tax". Archived from the original on 7 May 2019. Retrieved 6 May 2019.
  11. ^ Loo, Edwin (3 April 2017). "Lessons from Singapore about land value capture". www.rtpi.org.uk. Royal Town Planning Institute. Retrieved 2 May 2018.
  12. ^ Cite error: The named reference :1 was invoked but never defined (see the help page).
  13. ^ Alan Hughes, Mark. "Why So Little Georgism in America: Using the Pennsylvania Case Files to Understand the Slow, Uneven Progress of Land Value Taxation". Retrieved 16 March 2021.