Comment by adolph

This stems from the fact that if a landowner successfully discovers a valuable resource or identifies a creative way to utilize their land more productively, the government will increase their tax burden accordingly.

One of the difficulties of arguing against a hypothesis is avoiding stawperson construction. In claiming "An LVT discourages searching for new uses of land" the author sees land value as something different from what I've seen in LVT proponents. As I understand it, the point of LVT is avoiding what the author proposes.

As an example, many "downtown" areas in the US have many blocks with surface parking, a form of underutilization. Under the current system, consider a typical downtown and two adjacent blocks within it: 1. an multi-story office building, and 2. a surface parking lot. 1 will currently pay more tax because some of the assessment is based on the value of the building. Under an LVT system, 1 and 2 pay the same amount of tax because they occupy the same amount of land. Does the owner of 1 pay more because they utilize the land more productively? No.

To treat the argument fairly, consider two plots of land on a secondary highway in an entirely rural, impoverished county, taxed at $1/sq ft. On one plot, the owner builds a farmer's market and it is incredibly successful. (I use a market to avoid digressions into mineral royalties and negative externalities from things like an oil well.) Under the current system, the improvement of the market building is assessed for value without regard for how successful it is. The taxable value is land at $1/sq ft plus improvement. Under LVT as I understand it, after the market is built, both plots are still taxed at $1/sq ft. The economic activity of the market is not discouraged by taxing its existence (this is seperate from sales taxes, which the market would create). There is no increase in tax burden because of a creative use.