Editing Land value tax (section)

===Efficiency===
[[File:Perfectly inelastic supply.svg|upright=1.2|thumb|A [[supply and demand]] diagram showing the effects of land value taxation. As the supply of land is fixed, the [[tax incidence|burden]] of the tax falls entirely on the landowner. There is no change in the rental price and quantity transacted, and no [[deadweight loss]].]]
Most taxes distort economic decisions and discourage beneficial economic activity.{{sfn|Coughlan|1999|pp=263-4}} For example, [[property tax]]es discourage construction, maintenance, and repair because taxes increase with improvements. LVT is not based on how land is used. Because the supply of land is [[Elasticity (economics)|essentially fixed]], land rents depend on what tenants are prepared to pay, rather than on landlord expenses. Thus, if landlords passed LVT on to tenants, they might move or rent smaller spaces before absorbing increased rent.<ref>{{cite book |first=Adam |last=Smith |author-link=Adam Smith |title=The Wealth of Nations |title-link=The Wealth of Nations |year=1902 |orig-year=1776 |chapter=[[s:The Wealth of Nations/Book V/Chapter 2|Book V, Chapter 2]], Part 2, Article I: Taxes upon the Rent of Houses }}</ref>

The land's occupants benefit from improvements surrounding a site. Such improvements shift tenants' aggregate [[demand curve]] to the right (they will pay more). Landlords benefit from price competition among tenants; the only direct effect of LVT in this case is to reduce the amount of social benefit that is privately captured as land price by titleholders.

LVT is said to be justified for economic reasons because it does not deter production, distort markets, or otherwise create [[deadweight loss]]. Land value tax can even have negative deadweight loss (social benefits), particularly when land use improves.<ref>{{Cite book |last1=McCluskey |first1=William J. |last2=Franzsen |first2=Riël C. D. |title=Land Value Taxation: An Applied Analysis|publisher=Ashgate Publishing, Ltd. |year=2005 |url={{google books |plainurl=y |id=jkogP2U4k0AC|page=73}} |page=73|isbn=978-0-7546-1490-6 }}</ref> Economist [[William Vickrey]] believed that: {{blockquote|"removing almost all business taxes, including property taxes on improvements, excepting only taxes reflecting the marginal social cost of public services rendered to specific activities, and replacing them with taxes on site values, would substantially improve the economic efficiency of the jurisdiction."<ref>{{cite journal|last=Vickrey|first= William |title=The Corporate Income Tax in the U.S. Tax System |journal=73 Tax Notes |volume=597 |page=603|year=1996}}</ref>}}

LVT's efficiency has been observed in practice.<ref>{{cite web |last=Smith |first=Jeffery J. |title=Property Tax Shift Successes |work=The Progress Report |year=2001 |url=http://www.progress.org/archive/geono05.htm |access-date=13 June 2008 |archive-url=https://web.archive.org/web/20071214215127/http://www.progress.org/archive/geono05.htm |archive-date=14 December 2007 }}</ref> [[Fred Foldvary]] stated that LVT discourages speculative land holding because the tax reflects changes in land value (up and down), encouraging landowners to develop or sell vacant/underused plots in high demand. Foldvary claimed that LVT increases investment in dilapidated [[inner city]] areas because improvements don't cause tax increases. This in turn reduces the incentive to build on remote sites and so reduces [[urban sprawl]].<ref>{{Cite journal|last=Foldvary |first=Fred E. |title=Geo-Rent: A Plea to Public Economists |journal=[[Econ Journal Watch]] |year=2005 |url=https://econjwatch.org/File+download/66/2005-04-foldvary-tyranny-statquo.pdf?mimetype=pdf |url-status=live |volume=2 |pages=106–132 |issue=1|archive-url=https://web.archive.org/web/20200530150455/https://econjwatch.org/File+download/66/2005-04-foldvary-tyranny-statquo.pdf?mimetype=pdf |archive-date=30 May 2020 |access-date=2 January 2025 }}</ref> For example, [[Harrisburg, Pennsylvania]]'s LVT has operated since 1975. This policy was credited by mayor [[Stephen R. Reed]] with reducing the number of vacant downtown structures from around 4,200 in 1982 to fewer than 500.<ref>{{Cite web |last=Hartzok |first=Alanna |date=April 1997 |title=Pennsylvania's Success with Local Property Tax Reform: The Split Rate Tax |url=http://www.earthrights.net/docs/success.html |archive-url=https://web.archive.org/web/20111211123715/http://www.earthrights.net/docs/success.html |archive-date=2011-12-11 |access-date=June 14, 2022 |website=Earth Rights Institute}}</ref>

LVT is arguably an [[ecotax]] because it discourages the waste of prime locations, which are a finite resource.<ref>{{cite journal |last=Mills |first=David E. |title=The Non-Neutrality of Land Value Taxation |journal=National Tax Journal |year=1981 |volume=34 |issue=March 1981 |pages=125, 127–128 |doi=10.1086/NTJ41862356 |s2cid=232211606 }}</ref><ref>{{cite journal |last=Bentick | first=Brian L. |title=The Impact of Taxation and Valuation Practices on the Timing and Efficiency of Land Use |journal=Journal of Political Economy |volume=87 |issue=August 1979 |pages=859–860 |doi=10.1086/260797 |year=1979 |jstor=1831012 | s2cid=154577372 }}</ref><ref>{{cite journal |last=DiMasi |first=Joseph A. |title=The Effects of Site Value Taxation in an Urban Area: A General Equilibrium Computational Approach |journal=National Tax Journal |year=1987 |volume=40 |issue=December 1987 |pages=577–588 |doi=10.1086/NTJ41788697 |s2cid=232212658 }}</ref> Many [[urban planners]] claim that LVT is an effective method to promote [[transit-oriented development]].<ref>{{cite web |last=Gihring |first=Thomas A. |title=The Value Capture Approach To Stimulating Transit Oriented Development And Financing Transit Station Area Improvements |website=Victoria Transport Policy Institute |url=https://www.vtpi.org/gihring_tod.pdf |date=February 2009 |access-date=2 January 2025 }}</ref><ref>{{cite thesis |degree=Master's |last=Speirs |first=Mark |title=Land Value Taxation: An Underutilized Complement to Smart Growth Policies |url=http://www.urbantoolsconsult.org/upload/MarkSpeirsFinalPaper12-20.pdf |access-date=16 December 2012 |date=13 December 2010 |archive-url=https://web.archive.org/web/20120611180934/http://www.urbantoolsconsult.org/upload/MarkSpeirsFinalPaper12-20.pdf |archive-date=11 June 2012 |via=Center for the Study of Economics}}</ref>