How might we tax ourselves more efficiently and more justly, and avoid the high housing costs that plague our part of the state?
A simple tax reform will go a long way: Land Value Taxation.
At its simplest, LVT is a reform of the existing property tax, starting with reducing the tax burden on buildings, while increasing the tax load on land (remaining revenue neutral). This will produce more housing, more commercial space and lower rents and selling prices for both.
I suspect that we might find its results so desirable that we might then considering shifting some of our other taxation off of sales and off of wages.
How does Land Value Taxation bring down the price of housing? Well, just as an increase in interest rates reduces the amount that buyers have available in borrowing power, an increase in taxes on land value brings down the amount that purchasers are willing to pay sellers for ownership of land. (The dynamics of the tax on building value are different, which is why the current property tax is such a disaster.) The buyer (and the seller, too) are paying more on their land and less on their building -- which places a heavier burden on those with underused land and a lesser burden on those commercial property owners who have already put their land to good use.
When a residential developer can get land for a lower price, he can maximize his profit while putting a more modest home on it, if that is what the market wants. And today we clearly have a need for more modestly sized homes than the huge mansions that are being placed on expensive pieces of land. The builder makes his money from his labor and his talent, instead of from increases in land prices. But he has far more opportunities to do so. He creates jobs, and he creates housing and commercial spaces. Both are good for the economy.
We would again become attractive to businesses looking for a great place to locate -- where employees can afford housing within a reasonable radius of their work, where commercial rents are not ridiculously high, where there are concentrations of talented people, where people still have some money they can spend after they've paid for their essentials. All those things enter into "quality of life."
At the moment, the people who get wealthy are those who own our best land. We let them keep as private treasure value we've all created together. Land value taxation is the way to start to use that value for the common good, and the way to begin to reduce the taxes that burden the economy.
LVT invigorates local economies. Who is opposed to that?
Just give us the enabling legislation for land value taxation, and we will have this tool at our disposal.
We don't need to give tax breaks to employers. Just stop giving them to non-employers (through undertaxing land value).
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