How can the Land Value Tax be used such that the assessments are fair and accurate?
A question from the Help Desk:
I know that Strong Towns advocates for using a Land Value Tax rather than regular real estate taxes where the assessment is split between the land and the improvements on the land. I generally agree that this creates better incentives for productively using the land which will in turn help raise the value of the property and the wealth of the community itself. One of the practical benefits of the regular real estate tax system is that the assessment can be reset when a property is sold to reflect its actual value in the market place (even if more valuable properties are often left underassessed). With a Land Value Tax it seems a similar reset of the assessment is not as straightforward, unless the property is simply vacant land. My question is this - How can the Land Value Tax be used such that the assessments are fair and accurate when it doesn't always work well in the current regular system where that should be more straightforward?
Comments
1 comment
You've hit on a key challenge with the Land Value Tax (LVT) system. It's true that assessing the value of land separate from the improvements on it can be complex. However, it's not an insurmountable problem.
Firstly, it's important to remember that no tax system is perfect, and all involve some degree of estimation and approximation. The current system of property tax assessment, as you've noted, often results in under-assessment of more valuable properties and can be influenced by a range of factors that don't necessarily reflect the true value of the land.
In an LVT system, the focus is on the inherent value of the land itself. This can be determined by factors such as its location, size, and potential for development. While it's true that these assessments would need to be updated periodically to reflect changes in these factors, the same is true of property tax assessments.
One approach to ensuring fairness and accuracy in LVT assessments could be to use a combination of data sources, including market data on land sales, geographic information systems (GIS) data on land characteristics, and potentially even community input on local land values and development potential.
Ultimately, the goal of an LVT system is to encourage more productive use of land and discourage speculation and land banking. While the assessment process may be complex, the potential benefits in terms of increased development, higher property values, and a more vibrant community could well outweigh these challenges.
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