Capital Migration, Land Rent Changes, and Site Value Tax Adequacy

Abstract

The possibility of replacing the property tax with a site value (land value) tax has generated renewed interest in site value taxation in recent years. One reason for dissatisfaction with the property tax in its present form is that the part of the tax levied on capital discourages its use. Alternatively, if the entire tax were levied on site value, the distortive effect of the present tax would be elimi-nated. Among the problems associated with the substitution of the site value tax for the property tax is the adequacy problem. That is, site value may not provide a tax base large enough to raise the amount of revenue generated by the present tax. The purpose of this paper is to analyze the significance of these land rent changes in view of the problem of site value tax adequacy.