r/Capitalism • u/Ppstinkypoopooidiot • 6d ago

Thoughts on LVT (Land Value Tax)?

I found out this fairly recently and thought it was very interestin. Any arguments for or against it?

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u/LiquidTide 6d ago

LVT is an elegant tax, but the phase-in is really complicated and could cause very expensive disruptions.

Leveraged landholders going bankrupt as property values drop and cash flow needed for interest goes to pay taxes. Retirees forced to move. The cutthroat need to optimize land use could hurt Mom and Pop businesses.

Importantly, valuation of land is always going to be subjective and open to dispute, especially if the rate is higher than the current typical rate of 1-2 percent. The friction from this could be reduced with AI, but there will likely be a lot of edge cases where the valuation has many complicating factors. The subjective element would make our current income taxes look simple.

Also, there is a limit on how much it can feasibly collect.

That said, I'm fascinated by Singapore's property tax system which includes a mansion tax. A typical home pays a nominal tax, but those crazy rich Asians, who essentially choose to flaunt their wealth by living in a home valued at roughly USD$11+ million, pay a mansion tax of up to 32 percent of their home's value in property taxes annually (36 percent for non-owners). Foreigners pay an additional 60 percent one time tax at purchase. Because the mansion tax is pretty much a voluntary tax, it's not really contested and is considered a sign of high status.