Evidence on the Distributional Effects and Administrative Feasibility of a Land Value Tax

This study examines how replacing a uniform property tax with a land value tax would shift the tax burden. Most empirical studies that examine land value tax focus on the land value tax’s economic efficiencies (e.g., reduction in deadweight losses) or its effects on economic development (e.g., reduction in urban sprawl). Comparatively, there are few studies that provide detailed evidence on how a land value tax would shift the tax burden across property owners. The study uses parcel level property data for Tarrant County—an urban county located in the northeast part of Texas—over the 10 year period 1997 through 2006. The county covers approximately 864 square miles and currently has about 1.7 million residents. We examine:

The general effects of a land value tax on the tax burden across and within the different property classes.

The vertical and horizontal equity effects of a land value tax on owner occupied single family residential properties.

The chief appraisers in Texas; assessing their current level of awareness of land value and split rate taxation and obtaining their opinions on the administrative feasibility of a land value tax system

Understanding the land value tax’s equity effects is essential if the land value tax is ever to be considered a serious alternative, or supplement, to the traditional property tax. Academicians, policy makers, and taxpayers need empirical evidence on the land value tax’s distributional effects to help facilitate informed policy decisions.