Advocacy Report – June 2021

SPAAR - 06/18/2021

JUNE 2021

The Best Tax You've Never Heard Of

The property tax is a policy staple in the United States, you’re either a child or you have been living under a rock if you are unfamiliar with the general idea of what a property tax is. That is not true, however, of a tax that economists widely agree is the best, most efficient tax there is, the Land Value Tax.

The Land Value Tax is a levy on the unimproved value of land. Unlike property taxes, it disregards the value of buildings, personal property and other improvements to real estate. A Land Value Tax is generally favored by economists as (unlike other taxes) it doesn’t cause economic inefficiency.

Think about it in this way:

Taxes disincentivize production of the asset being taxed, whether that’s goods, services, or infrastructure. A Land Value Tax avoids this inefficiency because land is a fixed asset, we cannot (unfortunately) build more Earth.

Imagine there are two, identical, plots of land. On one plot, the owner decides to build a four plex, on the other plot the owner decides to make it a parking lot. Under a property tax system, the fourplex owner is taxed at a higher rate than the parking lot owner. In a world where increased supply and density drive down prices, making housing more affordable, why are we taxing the building owner at a higher rate than the owner of the parking lot?

Under a Land Value Tax, those two properties would be taxed at the same rate, regardless of what is on top of the lot. Meaning landowners would be highly incentivized to build on top of their land resulting in increased density and affordability.

To learn more about the Land Value Tax, visit this link.

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