According to the blog, land value tax is an efficient way to regulate the real estate market. Land value tax is a levy on unimproved value of land only, which means the owner of the original land will be taxed on the extra improved or constructed value of land. The economically rent of land will also be taxed. From the perspective of blog’s author, the land value taxation is so great, because the competition within the land market is drastically. According to the law of demand, as the price of products increase, the quantity demand will drop; therefore, the land value taxation can help market keep up running in a benign circulation. When thinking about any tax, economists focus on how it affects decision-making. With the land value tax, all things will not be better off.

Though the LVTs are wonderful, it is rare. One explanation is that it is too difficult to value land separately from what sits on it. There’s not much market and have many barriers. For example, the policy issues. The landowners who face a new tax bill and reduce of sale price would be cost more after tax, which means the demand will fall under this policy. Therefore, the problem is hard to overcome by this situation, because the economists will continue advocating land value tax, and the politicians will continue ignore this issue. However, anyway, the benefit of land value taxation will spread equally to today’s owners and their generations, which means the taxation is good for the economic growth overall.

Sources:

http://www.economist.com/blogs/economist-explains/2014/11/economist-explains-0

http://en.wikipedia.org/wiki/Land_value_tax

Image:

http://cdn.static-economist.com/sites/default/files/imagecache/full-width/images/2014/10/blogs/economist-explains/20141101_blp508.jpg