The Property Tax and Local Finance

By C. Lowell Harriss | Go to book overview
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Taxing Land More Than Buildings:
The Record in Pennsylvania


For decades, land-value advocates have urged that all taxes be shifted off wages and productive capital and onto land values, but they had no test cases to support their advocacy, at least not in this country. They could only appeal to logic. To be sure, the logic was impressive: by untaxing wages, take-home pay would be increased; by untaxing buildings, operating costs would be lower and new construction would be encouraged. If, on the other hand, land were to be taxed more, then inefficient land use would be discouraged because it would become too expensive—too much tax outgo, too little income or use. Landowners would be encouraged to put their sites to their most appropriate use, yet they would not be taxed for doing so.

A tax on labor or the products of labor would result in fewer of those desirable things. But a high tax on land values could not possibly reduce the supply of land; in fact, it would increase the available supply, since such a tax would discourage land speculation and underuse. A tax on land would key land use to land demand; a failure to tax it would result in sprawl, blight, and unemployment. There is also an ethical dimension to the logical argument: the locational value of land is produced by society. Hence society should collect through land-value taxation what it has produced rather than tax individually produced labor and capital.

Successful Applications Abroad

Australia, New Zealand, the Republic of South Africa, and Denmark are the countries most extensively applying land-value taxation. Most of their cities apply it for local-tax purposes. The application in New Zealand and Denmark is so widespread and so long-standing that it becomes difficult to know whether an alternative taxing system would produce any different economic results.

This problem does not exist in Australia or the Republic of South Africa,

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