Land Value Tax

Although the name may not be familiar to many Americans, the concept of a Land Value Tax (LVT) is not far removed from that of traditional property taxes. And although in this country, applications of LVT are currently largely restricted to municipalities and school districts in Pennsylvania, this policy is used in a variety of places – ranging from Singapore to Australia – throughout the world.

So what is a land value tax? The answer is simple, and we’ll use the model of more familiar American property taxes as the starting point for the explanation.

Traditional property taxes are based on the application of a single tax rate to the total value of an owner’s land and improvements (usually buildings, but this could also include things like grading and man-made drainage) as determined by a professional property assessor. A Split-Rate Tax (SRT) is any instance in which the assessed values of land and improvements are taxed at different rates. A “true LVT” is the farthest end of the split-rate spectrum, where the total tax burden falls on the assessed value of the land, leaving improvements untaxed (i.e. the tax rate on improvements is zero).

Despite the prevalence of traditional property tax structures in the United States, LVTs and SRTs can offer a number of distinct advantages to communities, tax payers, and the natural environment. Check out the resources on this page to learn more about Land Value and Split-Rate tax structures. And if you’d like to know whether one of these approaches might be right for your city or town, contact us for more information at [email protected].

Table one illustrates the differences between LVT, SRT, and a traditional property tax structure using a hypothetical property where improvements and land are each valued at $50K to illustrate this concept. Importantly, the owner’s total tax bill is held constant (at $1,200 annually) throughout the analysis, both to illustrate the underlying concepts with maximum clarity, and because (from experience) CPTR generally recommends a revenue neutral shift away from traditional property taxes in real world settings.

The starting point for the example in Table 1 is a traditional property tax rate of .012, which on a property whose total value is $100,000 yields a $1,200 annual tax bill. Under an LVT, the same tax obligation results from zeroing out the rate on improvements, and increasing the rate on land values to .024. For this example, we’ve used a Split-Rate Tax where 25% of tax revenue is generated by taxing improvements and 75% from taxing land, an outcome achieved by applying a rate of .006 to assessed value of improvements and .018 to the value of the land.

Table 1 (Example Parcel: Improvement Value=$50K/Land Value=$50K)
Tax Structure	Tax Rate (Improvements)	Tax Rate (Land)	Total Tax Bill
Traditional (U.S.) Property Tax	.012*($50,000)	.012*($50,000)	$1,200
LVT	*.00($50,000)**	*.024($50,000)**	$1,200
SRT	.006*($50,000)	.018*($50,000)	$1,200

Videos on LVT

An Introduction to Land Value Tax

What are the on-the-ground effects of a land value tax?

Everyone Works But the Vacant Lot

Land Value Tax and Millbourne, PA

CPTR Take on LVT

Is a Land Value Tax Right for Erie, Pennsylvania?

Land Value Tax, Ongoing Research, Our Take, Property Tax

This report provides the results of a preliminary analysis to determine the on-the-ground effects of implementing a land value tax (LVT) in Erie, Pennsylvania. While the findings contained herein give an accurate representation of changes in the general tax trends within the City that will result from the adoption of an LVT, CPTR recommends the conduct of a series of more detailed analyses to determine parcel-level and other effects before proceeding with adjustments to existing property tax codes, and is prepared to carry out this work with the participation and support of the City of Erie.

Is a Land Value Tax Right for Erie, Pennsylvania?

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