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twinhighmaintenance t1_itbqkza wrote

Reply to comment by ThePhysicistIsIn in Many countries have a "hidden welfare state" for incumbent homeowners, as governments subsidize homeowners through the tax system. The homeownership welfare state is strongest in the US and other Anglophone countries, but weakest in the Scandinavian countries. by smurfyjenkins

However, property taxes discourage construction of new homes, and maintenance and repair of homes, because these taxes increase when landowners develop and improve their property, and annual property taxes are passed onto renters as they roughly scale up with occupancy.

A fairer alternative is land value tax, a.k.a. "the perfect tax". The tax is levied based on the potential value of the land to its owner, which creates the opposite incentives. Landowners use land as a speculative asset less due to the cost of LVT, and benefit from developing land in order to realise higher incomes against the cost of LVT. Also, the cost of the tax is not passed on to tenants.

Essentially, property taxes are regressive and create deadweight loss, while land value taxes are progressive and economically efficient.

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