Land value tax must be sufficiently high to stop prices boom

Regarding Victoria White’s column “Site value tax would be better and fairer option than a property tax”, (Sept 27), I agree with everything except one point.

She said that property values go up and down while land prices remain static.

Actually, it is quite the opposite where land value is insufficiently taxed. If the assessors are doing their jobs they will notice that land prices rise dramatically during boom years as speculators see land as a good investment, and then periodically collapse when reality sets in.

Building values rarely increase by more than their maintenance costs. Yet this is not an argument against land value tax, because the bubbles are worst where taxes on land are lowest.

Pittsburgh, Pennsylvania, the first US city to adopt a land value tax in 1913, missed every land bubble of the 20th century.

Even during the Great Depression, Pittsburgh land values fell only 11%, compared to drops between 25% and 60% in other cities. Even Washington DC, the only town that boomed during the Great Depression, had a greater drop in land values than Pittsburgh.

Today land prices are rising in Pittsburgh due to an influx of business refugees from other cities. In contrast, California, which gets the smallest share of state and local revenue from real estate taxes, leads the nation in foreclosures and lost home value.

There is no way to stop inflated land prices from collapsing, as what goes up must come down.

However, it is possible to stop them from being pumped up with speculative hot air in the first place, and that way is land value tax.

Dan Sullivan

Pittsburgh

USA