There's a simple fix for America's housing crunch: stop taxing housing
Imagine your long-lost aunt has passed away and left you her collection of art, which includes a never-before-seen Norman Rockwell painting that she mistakenly painted over. Fortunately, the original Rockwell can be restored, but there are some complications.
The government sees the art as worthless in its current state, but if you restore the Rockwell painting, it will be worth $3 million — and subject to taxes of up to 20% of the value. You want to put the art on display for people to enjoy, but you would have to go into debt to pay off the tax bill.
Unfortunately, this is how property taxes work in most of America. If you own a plot of land, it can be cheaper and easier for you to let the land sit empty than it is to build an apartment building, an office, or a school on that plot. That's because in most of the country, real estate is taxed based on the market value of the landthe building that sits on it.
For a land-value tax, this means the government would base the amount an owner paid in taxes on how much a buyer would pay for a piece of real estate, minus the value of the property structure. Similar to the painting example, this would incentivize property owners and developers to get the most out of their land — for example, by building multiple units that could house more people, instead of a single gargantuan home.
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