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(Continued from previous article) There are indeed so many perks and advantages to the community should it adopt a land value tax instead of a general real estate tax, particularly if the land value tax system they6 choose to adopt is the two-rate land value tax system. But, as is often stressed, like any other taxation system that had been used and developed over the course of taxation history, land value taxation has its own sets of flaws and disadvantages which most people (who are against this system) like pointing out when they are arguing against it.

One of the biggest problems that are pointed out by the opponents of the land value tax system would have to be the fact that sufficient revenue is difficult to raise using this system. That is to say, in order for the land to make the sufficient revenue, one should expect to have the tax rate higher than the rate of return on land – and obviously, this unfair deficit in profit on the part of the owners of the land are more likely to inspire the abandonment of the land property than the retention of the property for continued use. Another possibility that may be inspired by this particular problem of the land value tax system, others point out, would be the heightened possibility of taxpayers evading taxes of this type, legally or illegally.

Another problem that a local government and community would face when adopting the land value taxation system, mentioned before, would be the reduction in the asset or real estate value of the property for the benefit of the property owner. This is because the land value tax increases the taxation of the “discounted present value of future after-tax rents”. This often dramatic decrease in the value of real estates, the opponents of the land value taxation system point out, are especially problematic for institutions that are dependent on the state of finance or the financial standing of the economy and their clients – examples of these establishments and institutions include banks that have a focus on real estate mortgage debts. Making things shaky for such finance-based institutions tend to shake up the financial system of the community as well. In the land value taxation system, the value of the land CAN be reduced to as low as zero (provided all the rent is recovered), and the private sector would lose much of its money because the total of privately-held asset value would drop by a quarter. (To be continued in next article)