page 1 of 7Real estate consists of a specific area of land in a specific location. In urban areas the property usually includes a building. The prevalent policy for government revenue is the same rate of taxation on all types of property. The value of the land and building is assessed separately but taxed at the same rate. An alternative opinion is that land and buildings should be taxed at different rates. INFORMATION ON REVENUES FROM LAND AND BUILDINGS
Land and buildings are valuable, especially in cities and suburbs. Taxation of their value provides revenue needed by local governments. The two types of property have different characteristics.
Land is not affected by recent human intervention. An advantage is that it does not require maintenance or repair. If neglected, it does not depreciate. Its value tends to increase gradually during a span of years. Inflation decreases the value of money and therefore increases the relative value of land. A disadvantage is that land does not generate revenue. Its value depends on the value of the surrounding location. A plot of land is more valuable if it is downtown or in a fashionable residential area of a growing city than if it is in a deteriorated neighborhood or in a declining city. The land becomes more valuable if a subway station or school is built near it. The owner of land therefore cannot control its value.
The value of a building is determined by its size, condition, and functions. It is generally more valuable if it is large, in good condition, and suitable for desired functions in its location. An advantage of a building is that it is a source of revenue. It can be rented to tenants. The building substitutes for paying rent if it the owner occupies it. A disadvantage of a building is that it requires maintenance. Even when well maintained, old buildings usually lose value in comparison with newer buildings. Similar or superior buildings in the neighborhood detract from the value of a building because of the greater competition for buyers or tenants.
The majority of Americans live in a city or in a residential suburb of a city. The large urban population benefits from desirable facilities, such as streets, public transportation, delivery of water and electricity, and disposal of wastes. A large population in an urban area requires land for residences and for commercial buildings. Land in a city or suburb therefore is valuable.
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