A policy to replace the U.S. federal tax system with a bracketed land value tax (LVT) would be structured to focus on taxing the unimproved value of land rather than income or buildings. This would incentivize productive land use, reduce speculation, and promote general economic stability. The policy would involve the following elements:
Brackets for Land Value: Set tax rates based on a progressive structure, with lower rates for land with lower assessed values and higher rates for high-value parcels. This tiered approach helps make the tax burden fair and progressive, targeting wealthy landowners who hold high-value land.
Assessment of Land Value: Implement an annual assessment system to determine land values, excluding improvements or buildings. Regular, transparent assessments would keep land values accurate, ensuring fair taxation across the system.
Federal and Local Collaboration: Allow states to adjust local property tax rates to reduce redundancy, and redirect a portion of LVT revenue to state and municipal budgets to support local services, which may also incentivize better land use policies.
Revenue Allocation: Use LVT revenue to fund federal programs, infrastructure, and environmental conservation, thereby reducing reliance on income taxes. Revenue from LVT could also support essential programs like social security, healthcare, and education.
Transition Period: To prevent economic disruption, gradually phase out existing income and corporate taxes over several years while LVT rates are introduced and scaled up. A structured transition with ample notice will enable landholders and taxpayers to adapt to the new system.
Some notes to add to the discussion: various cities and towns in Pennsylvania incorporated a viable middle ground by introducing a “split-rate” property tax system which favored land value tax at varying ratios to the value of improvements, and I view this as a solid model for what transition to full Land Value Tax could look like. However, notable failures occurred which led to the split-rate system’s abolition in Pittsburgh in 2001, and LVT was never implemented with the specific intention of transitioning towards total land value tax:
The assessment system was so broken that reassessments were a matter reserved for lawsuits rather than a regularly scheduled occurrence by mandate.
This tax system did not replace other forms of taxation even at local and state levels - instead, it was simply a revision to the property tax specifically, meaning that the potential benefits of relieving other forms of economic suppression in favor of punishing rent-seeking were not reached.
Regarding assessments, Lars Doucet has created good work in laying out contemporary research on the linear regression models and machine learning algorithms that provide accurate and specific land value assessments in the absence of specific data. These methods mostly take raw land sales in combination with a wide variety of environmental factors (distance from amenities, quality of surrounding improvements, quality of life, etc.) in order to arrive at fair and reasonable estimates. Most models take into account, at most, an 85% accuracy rating, meaning that there is some justification for the idea that some form of supplementary taxation should remain alongside LVT - but that it should also target rent-seeking behavior or deleterious behavior of some kind (such as taxation on tobacco or alcohol sales, or additional taxation on natural resources).