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(Continued from previous article) Before anything else, however, it must be explained that there are TWO types of land value taxation to be taken into consideration. The two-rate land value tax system, which has already been briefly described before, entails that there are TWO DIFFERENT RATES for the land property itself and the improvement imposed upon that said land property. The single-rate land value tax system, on the other hand, still separates the rates paid for both the land and the improvement, but maintains the SAME RATE for both. Right now, the kind of land value tax that is garnering attention for its potential would be the two-rate land value tax system. But there are actually advantages to using any for of land value taxation.

For example, there are more perceived advantages to the adoption of the two-rate land value property tax than one might imagine – remember, the two-rate land value property tax entails two separate rates for the land property in question and for the improvements made on said property; the land property tax rate being higher than the improvement of property tax rate. Believers and supporters of the two-rate land value property tax claim, for example, claim that there is a relationship between a high land value tax and high economic activity. A published paper on Georgist economics theory made a comparative analysis between single-rate and two-rate property taxation in Pennsylvania and concluded that the two-rate land value property tax encourages constructions and therefore improvements in infrastructure that would attract a more active economy. That is to say, the easier it is for people to build buildings in an area, then the easier it is to develop new businesses and a firms that would generate income for the community.

In general, as was mentioned before, land value taxation is is seen as a tax that makes little to no distortion in terms of economic decisions. That is to say, since land value tax does not necessarily require you to efficiently make use of the land being taxed, there would be little risk of excess burden of taxation. Sure, the market price of the land tends to decrease this way, but the tenants renting the land would not be subject to the land value tax – only the landlord is responsible for it. There is also less risk of having deadweight losses in land value taxation compared to other means of property taxation.

Another benefit of the land value tax system would be the fact that it encourages the efficient use of land, if not the practical and constant circulation of unsold properties. Perhaps the best way to explain it would be like this: paying for the land value tax means that landowners are pressured to develop under-used or even vacant property. The regular tax system often allows landowners to hold on to under-used or vacant properties, claiming that the improvements “can be or are to be done at a later time”. Of course, that is a purely speculative venture, and would hardly be productive in terms of harnessing the potential of the property. Discouraging this behavior, the land value tax system would either get the landowners to do something productive with the property or put the market back on the market so that they would not decrease the incidence of vacant lots and the wasting away of locations. The discouragement of speculative ventures by means of land value taxation has two other effects: renters themselves are discouraged from speculating over the future or probable value of the land once developed (thus decreasing a degree of economic stagnation), and the “immediate improvement” mindset brought forth by the land value taxation system will increase the value of adjacent land properties (like in special assessment property taxation), putting the tax burden of the improvements on the persons who are most likely to benefit from them.

Supporters of the land value tax system also point out that this particular system of taxation is pretty easy to understand, as it is a very straightforward affair in terms of assessment: all one needs is the name of the owner of the property and the valuation of the land. There is little to no need for forms, no need to deal with personal questions in filing (as is the case with income taxation), and – perhaps to the benefit of the government levying this tax – there is no way of evading this tax because it’s very difficult to hide a piece of land. Also, figuring out the value of the land instead of the value of its improvements make life easy for the assessors – the multitude of variables that are taken into consideration when determining a regular property tax is undoubtedly more complicated than the determination of the the land value property tax.

Then, there is also the argument (especially in Georgist economic theory) that land value taxation is based not on production costs, but rather on scarcity and desirability in the context of usefulness – that is to say, how much land one actually has versus the needs of the community for property that will serve as homes, leisure spaces and work spaces. Unimproved land, being unimproved, therefore has little value save in the context of the community. And, since this is a way of saying that the entirety of the land belongs to the community and is thus figuratively rented out, which is a fair way of looking at things. (To be continued in next article)