> The problem is that the land tax component of a traditional property tax is too small to deter land speculation. Although property taxes vary from place to place, they are typically between 1% and 2% of the property's total value paid annually. If inflation is low, then for longtime property owners, this amounts to roughly the same cost as if they paid a one-time sales tax on the property of between 10% and 20%. Thus, the property tax applied to building values inflates their price by between 10% and 20%. And the property tax applied to land value allows 80% to 90% of publicly-created land value to accrue as a windfall to landowners. Thus, typical land taxes are too weak to discourage land speculation.
Property taxes discourage existing inventory from being taken off the market in order to speculate via property holding, at the expense of also discouraging new building.
Land value tax discourages holding vacant or under-built property, at the expense of lowering the cost of the land. This means existing homeowners won’t be able to sell their old homes for as much as they could if fewer surrounding properties are developed (more modern, better built, larger, with more units), because their old home is closer to being worth the raw value of the land.
If you want to sell a $50,000 home for $500,000 because it sits on land that grew from being worth $10,000 to $450,000, then a LVT is terrible for you: you need to put in actual work improving your property rather than just sitting on a decrepit old building and selling it for a profit. The problem in the US is that the voters who mostly own their home can’t stomach their home value decreasing: that reduces their paper wealth as well as their ability to take out loans and second mortgages for things like college or car payments. So politically it’s a hard solution to push for (even if, on net, it would help the community be stronger).
Doesn't this presume that all property is taxed at a flat rate? Wouldn't the answer be to split the property based on what the city wants to accomplish? Then empty land can be taxed at a different rate to property with a residence on it (or whatever priority the city would apply).
Check out all the different tax rates that Wellington, New Zealand applies to a property [1]. I count 50!
> Property taxes discourage construction, maintenance, and repair because taxes increase with improvements. LVT is not based on how land is used.
From https://www.strongtowns.org/journal/2019/3/8/if-the-land-tax...
> The problem is that the land tax component of a traditional property tax is too small to deter land speculation. Although property taxes vary from place to place, they are typically between 1% and 2% of the property's total value paid annually. If inflation is low, then for longtime property owners, this amounts to roughly the same cost as if they paid a one-time sales tax on the property of between 10% and 20%. Thus, the property tax applied to building values inflates their price by between 10% and 20%. And the property tax applied to land value allows 80% to 90% of publicly-created land value to accrue as a windfall to landowners. Thus, typical land taxes are too weak to discourage land speculation.
Etc. https://duckduckgo.com/?q=economist+land+use+vs+property+tax...