Would property taxes which tax just land but not improvements (buildings) encourage development, or does...
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Would property taxes which tax just land but not improvements (buildings) encourage development, or does it not matter? Why? Pick the correct answer.
| a. | No. Land taxes create an incentive to invest in improvements to land because any tax increases are capitalized into the land price and reduce the cost to new buyers. | |
| b. | Yes. Land taxes create an incentive to develop because the parcel owner's returns to each additional dollar spent on improvements are not subject to the tax. The more intensely a parcel is developed the lower the average tax rate becomes on that parcel. | |
| c. | No. Taxes on land create a disincentive to buy land because the taxes will become higher and buyers will look for jurisdictions without the tax. | |
| d. | Yes. The land tax increases the progressivity of the tax system because land owners are likely to have higher incomes than people who do not own land. |
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