Why we need a green land value tax and how to design it

Abstract:

A model green land value tax (LVT) can resolve conflicts among meeting climate goals, equity and housing affordability, while reducing intergenerational injustice. Land prices, reflected in house prices relative to incomes, are near all-time records, pricing the young out of homeownership and affordable rents. The OECD confirms that annual property taxes linked to recent market values can improve macroeconomic stability and also boost long-run growth. The green LVT – effectively a split-rate property tax – would consist of a charge on the land plus a charge on the building minus a discount depending on its energy usage. Regular revaluations discourage speculation and avoid cliff-edge changes. To protect cash-poor but land-rich households, everyone would have the right to defer the tax. To avoid complex interest charges, the tax authority would register a proportionate claim at the land registry equal to the unpaid tax for each year deferred, settled upon the property’s transfer or sale.