In response to an article written by Harrison Astbury on November 18, 2020 Why a property tax is not the answer, I believe thatAstbury is half right. Real estate consists of two types of property, land and improvements. A property tax on buildings and other improvements is indeed not the answer. But a tax on land value is the answer to the question, what to tax?
Regarding retired families with low incomes, Astbury writes, that exemptions “would be so plentiful, the land tax hardly seems worth the administration required.” We need to see the numbers. There are many cities around the world, such as Sidney in Australia, which have a property tax only on land value, and they are doing well. Moreover, the tax would have postponements rather than exemptions. Also, some retired folks would wish to move to less expensive dwellings.
Astbury claims that a property tax heightens speculation, but a tax on land value does the opposite, since it reduces the purchase price of land. If the price of land drops to near zero, there is no value left to speculate with. The lower price of real estate makes home ownership more affordable.
Taxes on goods raise the cost of living. Taxes on land value do not raise the cost of goods, and they do not get passed on to renters, because a tax on rent or land value does not change the rent. If the landlord raises the rental charge, there will be vacancies, and they will lower the rental back to what is was.
No human institution is perfect, but a tax on land value comes closest to being equitable as well as efficient. It is equitable in sharing the rent equally, and efficient in not imposing extra costs, since rent will be paid anyway.