Land Value Taxation
What is it?
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Land value taxation is simply a tax on land rather than on a building's structure (capital and labor). Classical Georgist land tax or rent was thought to be the only tax required to provide all the revenues communities and governments required to operate; in a word, a single tax. Such a tax would eliminate all others taxes on income and on sales. There are nations that have successfully achieved such a single tax. In the United States we have fewer existing examples, but historically there have been many of cities through the US. In fact, property, primarily land, was once the only means to provide the necessary revenues for a new settlement and growing municipality. In these cases, we refer to a split tax: one on buildings and the other on land; this makes up the so-called property tax. The Property tax has gotten a rather bad rap, and much of it is well-deserved, because in most locations the tax is on the assessment of buildings. In practice, home and building improvement come at an expense over and above the cost of the materials and labor, because the improvements cause an additional tax on the new assessment.
Land Use and Affordable Housing
RNLC approaches affordable housing through the premise that land availability is essential to ensure affordable housing for owners and renters.
Land Value Tax (LVT), sometimes referred to as a split rate tax, was articulated by the late 19th Century by the political economist Henry George. As he noted that with the increase in progress, wealth would concentrate and create larger number of poor. The association he noted was one of access to land. George’s Progress and Poverty details his thinking and was rapidly embraced in various parts of the world, most notably South Africa, Australia, New Zealand and Denmark to mention a few. Here in the USA, it was successfully used in various areas, but took a firm hold in Pennsylvania where over 20 towns and cities have had empirically supported positive results.
Very simply LVT shifts taxation (or rent) to land usage and away from buildings (labor and capital). This shift alleviates building improvement taxation.
The primary benefits are the following:
Reduction in land speculation freeing up land for urban development
Reduction housing and rental costs
Home and building improvement
More efficient use of urban infrastructure through density
Alleviates the economic drag caused by other forms of taxation, particularly the property taxation of building over land
Why is a tax on land value good?
Neutral with respect to its influence upon behavioral choices,
Efficient insofar as there is no “excess burden” (a fancy word for productivity loss and economic drag).
Equitably progressive insofar only individuals or households that own land pay any tax at all, and because middle class homeowners for the most part own only modest parcels under their houses or farms where land is cheap.
Administrable because it's totally transparent, not likely subject to challenge, and can't be take it to an off-shore tax haven.
Simple to understand, by all members of the community, and
Stable, so that it doesn't impact on budget designs very much.
Why it's so important to Cities like New London as well as open space and farm lands.
Over time, in primarily in the United States, land value tax has been a focused tax applied primarily to cities and towns. While Pennsylvania is the only state which provides the means to use it as such, the State has not chosen to use it exclusively, but to be used at the discretion of individual municipalities. Where applied this has been to great advantage.
However, Land Value Tax, while focused on urban centers where the greatest speculation and depletion of revenue occurs and is visible, serves not only the interest of the city, but the outlying areas and the State in which the City resides.
First, cities gain because a shift to land has the effect of stimulating density through development where currently there is none. In so doing, the revenue base is increased thus alleviating the burden of those already paying their far share on taxation. As efficiencies are increased through density and thus revenues increased, the municpality can pick up most if not all of the cost of running the city - including infrastructure, social services, and education. These are currently the burden of State governments (at least 50%) and those funds come from outlying towns.
So, outlying smaller towns who share in the burden of their poorer urban centers are relieved.
Additonally, while the city begin to see an upswing in its economy, the density produced, actually works to reduce the high cost of urban sprawl. The greatest economic activity will go to those areas where development is rewarded, downtown. This ties perfectly into the notion of Smart Growth with its focus on urban density, energy efficiency and mixed residential and commercial living.
References
Wealth and Want is a site filled with the writings of nearly every perspective imaginable on land and Henry George it is truly a gift that Wyn Achenbaum, the owner of this site, provides us.
Urban Tools is a great website for those inclined to research land, and specifically, land value tax policies throughout the country and world. The data and reporting is provided by the Henry George Foundation/Center for the Study of Economics.
Progress and Poverty is the premier work of political economist Henry George. George has been likened by some of the greatest 19th and 20th century thinkers as one of the top ten thinkers in all of human history. His work is truly astonishing and provides the foundation for Land Value Taxation.
Robert Schalkenbach Foundation provides a rich and carefully researched compendium on Land, and Georgist thinking.