Proposed Bill Would Study Implementation of Statewide “Land Value Taxation” System
Assembly Member Alex Lee introduced legislation to commission a study on replacing California’s property tax appraisal methods with a statewide “land value” taxation system. The system is intended to remove the incentives to hold “unused land solely for price appreciation.”
AB-362, introduced February 1, 2023, would require the California Department of Tax and Fee Administration to conduct or commission a study on the efficacy of a statewide land value taxation system as an alternative to the current property tax appraisal methods. The bill would require the study to be completed by January 1, 2025.
The bill defines a “land value tax” as a levy on the value of land without regard to buildings, property, or other improvements. It states that such a system will make more land available for “productive uses” by removing the financial incentives to hold unused land solely for price appreciation.
The bill notes that a land value system is in place in Denmark, Estonia, Lithuania, Russia, Singapore, and Taiwan and in parts of Australia and Mexico. The bill reports that Allentown, Pennsylvania adopted a land value tax through a split-rate system in 1996, and the number of building permits has since increased by 32%. It also reports that California considered such a system in 1918 under Proposition 19, which would have required all public revenues to be raised by land value taxation.
The bill credits Henry George for developing the idea of the “land value tax” in 1879 and for the development of the political philosophy of “Georgism.” Although not defined in the bill, the philosophy of Georgism holds that the economic value of land and natural resources should be shared equally among members of society. George believed that a tax on land, rather than on labor, would increase productivity and reduce poverty.