A land value tax is an annual charge levied on the value of land, rather than the property that sits on it. This concept has been around for centuries and has gained support from notable figures such as Adam Smith, David Ricardo, and Winston Churchill. The idea is that land gets its value from location, rather than the quality of the development on it. This means that landowners would pay a tax on the value of their land, regardless of whether a property is built on it or not.
Proponents of a land value tax argue that it is a fair and efficient way to tax the 'unearned betterment' of land, which is the rise in value that has nothing to do with the owner's efforts and everything to do with the state and community. This can include factors such as proximity to city centres, transport links, schools, and parks. By taxing land value, it is hoped that landowners will be encouraged to make use of their land, rather than hoarding it or leaving it vacant.
Some notable figures have expressed support for a land value tax, including Milton Friedman, who referred to it as the 'least bad tax'. Friedman argued that this tax would not discourage growth and enterprise, as the supply of land is fixed and cannot be reduced by increasing taxes. In fact, a land value tax could stimulate growth by penalising inactivity and encouraging landowners to make use of their land.