12/11/2023

Tax the Buildings or Just the Land

Ohio economists debate the benefits

It’s a hot topic in the economics world: Would it be fairer and better public policy if we were to tax just the land on which buildings sit instead of the land and all the improvements as well?

Proponents of the land-value tax argue for what they see as its obvious benefits:

• A land tax would be fairer to lower-income property owners because they pay a greater percentage of their income for housing. 
• By taxing land and not buildings you’d encourage development of vacant, blighted properties not by taxing their development, but instead by creating a disincentive to leave them dormant.
• Overall real estate values are prone to bubbles and other heavy swings due to market inefficiencies, while land values are more stable. Therefore, taxing only land would give government officials greater predictability when they budget.

In real-world Detroit, the city government is asking the state legislature to allow it to put a partial land value tax to a vote next year. It would cut taxes on buildings by $14 for every $1,000 of assessed value, while more than doubling land taxes.