Quote:
Originally Posted by gjhall
Easiest way to achieve that: tax the value of the land, not the building/use. There goes any incentive to leave a lot vacant or extremely under-utilized.
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This idea keeps cropping up - and it's a bad one.
For starters, how do you determine the value of land? It's hard enough already figuring out the value of property, but now you'll not only have to figure out the value of the property but some way of subtracting the value of any buildings on it. Unless you've got lots of vacant properties lying around that change hands reasonably frequently, you simply have no good way to determine land value.
Beyond the practical issue is the distributional aspect.
Right now, the owner of a townhouse on a small plot in Little Italy can easily pay as much property tax as the owner of a large detached house on a large lot in Nepean, since the two property values are roughly the same - a low value house on a high value lot vs a high value house on a low value lot. This of course makes little sense, since the townhouse dweller in Little Italy is costing the city a lot less.
But look what happens when you switch to land value taxation: the townhouse dweller's taxes go up since his land is worth a lot while the suburbanite's taxes go down since his land is not worth all that much. We'd be going from a bad situation to one that is even worse. You create an odd incentive for cash-strapped inner area landowners to vacate properties downtown and move out to the suburbs. Over time, development downtown would get denser while development in the suburbs would get even more spread out since people can afford to hold more land for the same level of property tax due to the fact they no longer pay tax on the value of their dwelling.
The way out of this is to stop wasting everyone's time with some kind of value taxation and switch instead to land area taxation. Now your suburban dweller pays more than the resident of Little Italy. It increases the incentive to densify in the suburbs while lessening the incentive to do so downtown, resulting in a more even density overall.
It's also administratively simple since property size does not vary much over time: no more of this ritual of continual MPAC assessments and people getting upset about them.