A Land Value Tax (LVT) is a tax on the unimproved value of land. It is based solely on the location, size, and desirability of the land and excludes any buildings, structures, or other improvements made by the owner.

LVT is rooted in the idea that while people are entitled to the value they produce from their labor and capital, the value of land comes from nature and the surrounding community and therefore should be reinvested into the public good.

The Justification for Taxing Land

When we examine common forms of taxation, such as income tax, sales tax, and property tax, it becomes clear why many consider these taxes unjust. What someone creates through their own labor rightfully belongs to them. This idea is often summed up by the phrase: “You are entitled to the fruits of your labor.” If you choose to trade the product of your labor with someone else, that transaction is a voluntary exchange between individuals. And if your labor produces capital, say, a machine that generates further wealth, you are likewise entitled to the returns that capital produces.

Land, however, is fundamentally different. No individual created the land; it existed long before the first humans walked the Earth. Throughout history, land has been something to be claimed and conquered, whether by ancient empires, conquistadors, imperialists, or modern oligarchs. If we had the ability to create land, perhaps we wouldn’t take it from others.

Now suppose someone buys land in a rural area. Years later, the surrounding area develops with homes, businesses, and infrastructure. Naturally, the value of that person’s property will increase. But the important question is: who created that increase in value? Assuming the property owner didn’t make any significant improvements, the appreciation came from the community, through new neighbors, shops, roads, and public services.

If businesses open up a few minutes from your home and your home value rises as a result, it’s not because of anything you did. You’re benefiting from the efforts of others. And that’s precisely why, as land values increase, so should the LVT. These taxes help return that value back to the community that created it.

Economic Benefits of Only Taxing Land

If the philosophical or ethical justifications for a Land Value Tax haven’t convinced you, perhaps the economic case will.

There’s a common phrase in discussions about taxation: “If you want less of something, tax it.” This holds true for most types of taxes, but notably, not for land.

Sales tax is a clear example. When everything you buy costs more than the sticker price, people are discouraged from spending. And since one person’s spending is another person’s income, this reduces economic activity.

Property tax, as it’s commonly implemented, taxes both the value of the land and the improvements made to it. When property taxes are high, homeowners may hesitate to invest in upgrades, like finishing a basement, building a deck, or adding a garage, because those improvements increase their tax bill. The result? Fewer construction jobs, less local spending, and reduced economic growth.

Income taxes follow the same logic. When people are taxed on what they earn, they have less to spend. And again, if people are spending less, others are earning less.

Now here’s the part you’ve been waiting for: what happens when you tax land?

If you were worried your property might vanish into a black hole, rest easy, your land isn’t going anywhere. In fact, taxing land encourages more economic activity. When a landowner’s tax bill rises, say, because their community has grown and their land is now more valuable, they’re incentivized to make the most of that land to offset the tax burden.

For instance, they might hire a contractor to build an accessory dwelling unit (ADU) and rent it out. In this scenario:

  • A builder gets hired (stimulating the local economy),
  • There’s no additional sales tax on the construction labor,
  • The improvement itself isn’t taxed (since we’re only taxing land, not buildings),
  • The owner earns rental income (untaxed under a pure land value tax),
  • And that rental income can help cover the higher land tax.

That’s a lot of economic activity, without the deadweight loss typically associated with other taxes.

How LVT Discourages Land Speculation

Another prominent justification for a Land Value Tax is that it reduces land speculation. It is common for individuals to purchase open land with the intention of simply holding it and profiting from price appreciation over several years. Because property taxes are typically low, due to the absence of any structures, the carrying costs remain minimal. As a result, speculators can realize significant profits even after accounting for property taxes.

This practice not only leads to inefficient land use but also allows landowners to benefit from excluding others from accessing the community. An appropriately structured LVT would make it unprofitable to sit on idle land, compelling speculators either to develop the land or sell it to someone who will.

Why LVT Cannot Be Shifted to Tenants

One common critique of a Land Value Tax is the concern that landlords can pass the cost onto tenants. This is an understandable assumption, as many other forms of taxes, such as corporate taxes or tariffs, can often be shifted onto employees or consumers. However, this is not the case with LVT, because it is a tax specifically on the market rental value of land itself.

Let’s walk through an example: suppose a landlord’s LVT increases, and they attempt to raise the tenant’s rent to cover the additional tax expense. If the tenant agrees to pay the higher rent, it signals to the market that the land’s rental value has increased. As a result, the assessed land value, and thus the landlord’s LVT, would rise again. This cycle could continue until the tenant decides the rental price no longer reflects the value they receive and moves elsewhere.

In this way, the market effectively prevents landlords from successfully passing LVT onto tenants. Instead, LVT encourages landowners to use their land efficiently or lower their price expectations to match what tenants are willing to pay.

Conclusion

A Land Value Tax offers a fairer, more efficient way to fund public goods without discouraging productive work or investment. By taxing only the unimproved value of land, we can minimize economic distortions, encourage the responsible use of valuable land, and ensure that the benefits of community growth are shared by everyone, not just those who happened to own land at the right time. Unlike traditional taxes that penalize labor, spending, or innovation, LVT targets unearned gains and redirects them to serve the common good. If we truly believe in rewarding hard work and building thriving communities, it’s time to take the idea of Land Value Tax seriously.