Much of the literature on land-value taxation is about its theoretical basis and economic effects, but those introduced to the concept also seek to understand how it would be implemented. As I am most familiar with the governments of the USA, I will describe how I think land-value taxation (LVT) would best be implemented in the United States.

Property taxes today are handled by county governments, and for several reasons, the best implementation of LVT would be by the existing county institutions. As Henry George wrote, it is best to disturb current practice as little as possible. Also, the county level of government keeps the process close to the people, the counties being the lowest level of government that covers all the territory.

Since the county is passing on a large amount of the revenues to the state, the incentive is to pass on as little as possible, and therefore to under-assess the land value. Therefore there would be a county-level board of assessors of, for example, nine members. The federal, state, and county governments would each appoint three members.

Unlike today, where the property tax is mostly kept by local government, when there is a single tax on land values, spread among all levels of government, the board of assessors should represent all the levels. Since the county is passing on a large amount of the revenues to the state, the incentive is to pass on as little as possible, and therefore to under-assess the land value. Therefore there would be a county-level board of assessors of, for example, nine members. The federal, state, and county governments would each appoint three members.

The board of assessors would appoint professional real-estate appraisers to be land-value assessors. There would be an annual value assessment for each plot of land. Each plot would be valued by two assessors, who would use recent comparable sales and rentals, rebuilding costs, and income capitalization rates, to appraise the purchase price of the site, net of transaction costs such as sales commissions, title insurance, and other closing costs.

The board of assessors would appoint professional real-estate appraisers to be land-value assessors. There would be an annual value assessment for each plot of land. Each plot would be valued by two assessors, who would use recent comparable sales and rentals, rebuilding costs, and income capitalization rates, to appraise the purchase price of the site, net of transaction costs such as sales commissions, title insurance, and other closing costs. Another method would be to assess the implicit land rent, but since the practice today is to assess the purchase price, that would be the most likely method for LVT in the USA.

Another group of assessors would examine neighborhood maps to make sure the plot assessments were mutually consistent. Finally, the county board of assessors would examine the entire assessment to ensure that there is no bias in favor of excessively high or low values.

One problem that always comes up with LVT is the treatment of retired folks with low cash incomes, or a person who loses a source of income and has no savings. One solution is a market for LVT insurance. The insurance company would pay any unexpected large increase in the rent, and would also pay a portion of the LVT after a particular age, or would pay the LVT for some time duration when the insured person has a sudden loss of income.

One problem that always comes up with LVT is the treatment of retired folks with low cash incomes, or a person who loses a source of income and has no savings. One solution is a market for LVT insurance. The insurance company would pay any unexpected large increase in the rent, and would also pay a portion of the LVT after a particular age, or would pay the LVT for some time duration when the insured person has a sudden loss of income. Another possibility is for the county to postpone the payment of the tax until the property is transferred, or when the value of the estate is applied to the tax owed. A third possibility is for the retired persons to move to a lower-rent neighborhood, as many anyway move to assisted living or to an apartment.

The assessments would be a public record, accessible on a web site. A title holder could protest his assessed value to an appeals board.

The assessments would be a public record, accessible on a web site. A title holder could protest his assessed value to an appeals board. If still not satisfied, the land owner could bring his appeal to a jury, but would have to pay the court costs, including jury payments, if he lost the case.

The county tax collector would then send monthly tax bills. For owner-occupied real estate, the bill would go to the title holder, which could be a partnership, corporation, or government. All land holders would pay the tax, including government-held lands. For properties with landlords renting to tenants, the tax bill could be sent to the tenants rather than the title holders. The title holders own the rights of land possession, rights to control the use, and to transfer title, but they do not properly own the land rent. In some commercial property, the tenant pays the property tax anyway. Thus rather than the tenant paying rent to the landlord, who then pays it to the county, it would make sense to have the tenant pay the tax directly to the county. On the other hand, where there are residents whose tenancy and payments are uncertain, the county board may decide to charge the owner of the property.

Just as with today’s income tax, the funds are typically deducted, or withheld, from the worker’s wage, land-tax payers could choose to have the amount automatically deducted from a bank account. There could be a discount to encourage this method.

Just as with today’s income tax, the funds are typically deducted, or withheld, from the worker’s wage, land-tax payers could choose to have the amount automatically deducted from a bank account. There could be a discount to encourage this method. Late fees would apply for tardy payment, and if the tax is not paid for a number of years, the count would place a lien on the property, and eventually sell it for the payment, as is the practice today. Nobody would go to prison for the failure to pay a land-value tax.

As the LVT is distributed to several levels of government, there would have to be one supreme deciding level. That would be the federal government. Congress would decide what portion of the LVT would go to the federal government. The state governments would then decide how much of the LVT would go to the state. The county’s elected board of government would decide how much of the remainder is kept by the county. Thus the county would pass on revenue to the state, which would pass on revenue to the US Treasury. The county would then pass down a portion of revenue to the city and town governments, plus any special districts that have their own governance.

If a state government fails to pass on its share of tax revenues to the US Treasury, the federal government would have the authority to directly tax the property owners, with an extra penalty. During the War of 1812, the US government levied a national property tax, with a discount if a state collected the funds and sent it to the federal government.

If a state government fails to pass on its share of tax revenues to the US Treasury, the federal government would have the authority to directly tax the property owners, with an extra penalty. During the War of 1812, the US government levied a national property tax, with a discount if a state collected the funds and sent it to the federal government.

Some of the LVT revenue should be distributed in money to all the residents in equal shares. The shares going to children could be in the form of education vouchers. The distribution would be done by the counties. There would then be two political pressures. The first pressure would be to decentralize government, as each level would seek to maximize the funds it receives and keeps. The second level of pressure would come from the voters to optimize government spending, since each dollar spent by government implies one less cash dollar going to a resident.

Congress would also allocate a portion of revenues that would be sent to the governments of the native Indian nations. The Indian governments would also levy a local land-value tax, so that all Indian land plots pay the full LVT. Indian lands would be assessed by the counties, but whether the county would collect taxes on Indian lands would depend on arrangements the Indian nations make with the county and state government for services such as highways and education.

While LVT as a single tax could be implemented within today’s US Constitution, it would be better to change the Constitution by replacing the 16th amendment with a new amendment that confines taxation to land values and pollution, and authorizes the taxation of implicit rent and land value. The provisions of the US Constitution that require direct taxes to be apportioned by state population would be explicitly repealed.

There are indeed some complexities with the taxation of land values, but the social cost and complexity of LVT is vastly reduced compared to the excess burdens of taxing wages, enterprise profits, interest, dividends, and goods, and the extreme complexity and cost of having multiple sources of tax revenue.

© Text Copyright Fred Foldvary, Ph.D. rights reserved.
Click here to participate in a community survey and enter a raffle.