By taxing land more than buildings, cities can encourage valuable sites to be used productively, rather than banked by investors hoping for even higher prices.
Citing delays in the redevelopment of large, valuable parcels of land, a recent opinion piece calls for Minneapolis-St. Paul to adopt a land value tax that would discourage speculation.
"With the Twin Cities economy constantly changing, we need a tax system that rewards building and site improvements, not windfall profits from real estate speculation."
"The value of land is created not by individuals, but by the growth in population and wealth of the surrounding community and by the community's investments in public services and infrastructure. Land value taxation recaptures community-created value for the needs of the community while providing an incentive to put sites to their highest and best use. With the right incentives in place, we won't have to worry so much about how long it will take for the site of the next closed manufacturing plant to come back to life."
The authors cite the experience of communities in Pennsylvania in implementing such a tax measure.
"Harrisburg -- once one of the most distressed cities in the nation -- has seen the number of vacant buildings in the city drop 85 percent since making this shift in the early 1980s. Over the same time, Harrisburg has registered more than $3.1 billion in new investment, seen the number of businesses increase from 1,908 to more than 5,900, and watched taxable real estate values rise from $212 million to more than $1.6 billion."