Let's say your neighbors build great restaurants, bowling alleys, and office parks, making your location more desirable and increasing the market value. As a r

Let's say your neighbors build great restaurants, bowling alleys, and office parks, making your location more desirable and increasing the market value. As a result of a (high) Land Value Tax, your tax bill just went up significantly, but your earnings have not. So you are incentivized to put your property to productive use. Of course, you could alternately just sell your now-valuable land. However, the higher the ongoing tax bill (due to the LVT) the less people will want to pay for your land. The LVT captures some or much of the value currently accruing to landlords (depending on how high it is). High property taxes can serve a similar function. Taxing the unimproved value of the land removes a disincentive to improve the land, though. If you knock down your house and build a much better one on the same land, your property taxes would go up while LVT would not. LVT vs property tax is not the main point, though, in my opinion. The real issue is moving from heavy reliance on income tax to heavy reliance on property tax or LVT.