Land value tax

A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements upon it. Some economists favor LVT, arguing it does not cause economic inefficiency, and helps reduce economic inequality. 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. 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. Economists since Adam Smith and David Ricardo have advocated this tax because it does not hurt economic activity, and encourages development without subsidies.

A type of land value tax known as the single tax became central to Georgism, a normative school of economic thought. Henry George, its originator, argued that a land value tax should be the only source of public revenue because the supply of land is fixed and because public infrastructure improvements would be reflected in increased land values, which could thus fund public services. George also argued that fully taxing this "unearned increment" was superior to taxing productive effort. Economists have formalized a related but more limited result, the Henry George Theorem, showing that under certain optimal conditions, aggregate urban land rents can fully fund local public goods.

Jurisdictions with property taxes generally tax land value at the same rate as other real property. Some have adopted a separate, low-rate land value tax is currently implemented throughout Denmark, Estonia, Lithuania, Russia, Singapore, and Taiwan; it has also been applied to lesser extents in parts of Australia, Germany, Mexico (Mexicali), and the United States (e.g., Pennsylvania).