Landlords cannot pass a land value tax on to tenants
Because land supply is fixed, the economic incidence of a land value tax falls on the landowner — it cannot be shifted to tenants through higher rents.
The Claim
A landlord cannot raise rents to pass a land value tax on to tenants. The tax is borne by the landowner, showing up as a lower land sale price and lower net rental income.
Why — the Incidence Argument
Rents are set by supply and demand for the use of land, which the tax does not change: the land is still there and still as useful. A landlord already charges the maximum the market will bear; an LVT does not let them charge more. Because land supply is perfectly inelastic, standard tax-incidence theory assigns the entire burden to the factor that cannot respond — the landowner. This is the same property that gives LVT its zero deadweight loss.
Contrast a tax on buildings or sales: those can raise the cost of supplying the taxed thing and so be partly passed on. Land is different precisely because its quantity does not respond.
The Evidence
- Doucet, Does Georgism Work? Part 2 (2021) works through the incidence argument and the empirical literature on property-tax capitalisation, concluding the land portion of the tax is not passed through to tenants.
Strength of Evidence
Strong — this follows directly from textbook tax-incidence theory under inelastic supply and is among the least disputed claims about LVT among economists.
See Also
Sources
- Lars Doucet (2021), "Does Georgism Work? Part 2: Can Landlords Pass LVT on to Tenants?", Astral Codex Ten — wiki summary · original