How to Fund City Growth? Value Capture

"Land value tax dates back to the early roots of modern cities, and it could end up financing our future. In the wake of the financial crisis, governments are reconsidering this progressive tax to fund large, city-building projects," writes Walter Fieuw, Program Manager for the Greater Tygerberg Partnership.

"For those who are unfamiliar, land value tax is a special and progressive tax leveraged against unimproved land value. 'Land' is the unimproved site, not counting infrastructure or buildings; 'Value' refers to the increased market value after public investment; and 'Tax' is the payment due for exclusive occupation of the site.

"The idea to capture value was first popularized by economist and social reformer Henry George (1839–1897) who was convinced that revenue generated from nature and land belonged to society. In his seminal work, Progress and Poverty, George argued that taxing value increases of unimproved land is economically efficient since wealthy developers will foot the bill. George also argued that land value tax deters speculative land holding.

"Even though value capture sounds like a great idea, it challenges the structures and powers of city growth and management. There are some tough choices to be made by the current and next generation of city leaders and managers."